ASIC finds high level of withdrawn motor vehicle insurance claims

Australians who find themselves in a spot of bother with their car have a good chance of making a successful insurance claim, a review of motor vehicle insurers has found.

ASIC’s review of more than 1.2 million claims made during 2009 found only 3317 (0.3%) were formally denied.

The report also found a relatively low level of claims-related complaints with 5885 of the total 26,500 complaints received by participating insurers in 2009 being progressed to an internal dispute resolution team.

ASIC’s Report 245 Review of general insurance claims handling and internal dispute resolution procedures (REP 245) looked at eight general insurers, representing 20 car insurance brands and approximately 75% of the direct retail market.

‘Most consumers have motor vehicle insurance, and many will make a claim at some time,’ ASIC Commissioner, Peter Boxall, said. ‘Because no insurer-specific comparative data exists for claims handling performance of Australian insurers, it is difficult for consumers to shop around on the basis of quality, efficiency or fairness of claims handling.

‘For consumers, the intrinsic value of an insurance product is in the ability to make a successful claim when an insured event occurs. These findings are important in ensuring confident and informed financial consumers.’

The review also makes a number of recommendations including that insurers should record information relating to both denied and withdrawn claims, and should regularly analyse and review that information. In addition to the very small percentage of claims that were denied, more than 7% of claims made in 2009 were withdrawn.

‘We think that recording and reviewing information about both denied and withdrawn claims is important, as it may assist in identifying issues relating to disclosure, advertising, sales processes, product design or internal procedures,’ Dr Boxall said.

‘We also think it is important to understand the circumstances in which claims are withdrawn, to ensure that policyholders are making properly informed decisions that operate in their best interests.’

A further recommendation calls for insurers to provide written responses to consumers who complain about the outcome of their claim, both after any initial review of the complaint as well as when a dispute is finalised. A written response should set out the reasons for the decision, the availability of further review and information about the Financial Ombudsman Service.

‘We think our findings are likely to have a broader application across other general insurance product lines, and will work with industry to encourage broader adoption of our recommendations,’ Dr Boxall said.

Background
In 2009 there were more than 8.5 million motor vehicle insurance policies in force, 87% of which were comprehensive policies.

For the review insurers were asked to provide statistics and internal documents in relation to claims handling and internal dispute resolution procedures for motor vehicle insurance policy claims lodged in the period 1 January 2009 to 31 December 2009.

Where consumers want to dispute the denial of a claim by their insurer, they should first take it up with through the insurer’s Internal Dispute Resolution (IDR) process. If they are unsatisfied with the outcome they can go to External Dispute Resolution (EDR). It is mandatory for all insurers to provide both IDR and EDR. EDR is free to access and provides an independent, binding decision. The scheme insurers belong to is the Financial Ombudsman Service.

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