Key points
- Improving consumer outcomes is a key strategic priority for ASIC. We are focused on improving insurers’ claims handling, dispute resolution, and treatment of vulnerable customers.
- Insurance can be complex, but customers’ expectations are often simple. Listening and responding to those expectations is critical to rebuilding trust and confidence in the industry.
- We remain concerned about the number of unresolved claims from the 2022 floods. It is time to give these individuals and families closure.
It is great to be here and great to continue the tradition of ASIC and APRA appearing at this event, as we do together in many of our engagements with the ICA.
I would like to start by acknowledging the Traditional Owners of the land on which we meet today, the Jagara (Yuggera) and Turrbal people, and pay my respects to their Elders past and present.
I mention as Suzanne [Smith from APRA] did, that we do a lot of our work on insurance together. That’s in a context where we have quite complementary but different roles.
ASIC’s role is obviously as the conduct and consumer protection regulator, and so my comments today are very much about opportunities for improving consumer outcomes in the general insurance sector.
Improving consumer outcomes is a core strategic priority for ASIC, as announced in our most recently published Corporate Plan.
Many of the focus areas under that strategic priority are directly relevant to general insurers. They include claims handling, dispute resolution, and treatment of vulnerable customers.
In focusing on these areas, we seek to ensure that insurers deliver what their customers expect from them.
In saying that, we would acknowledge that the details of many insurance policies are understandably complex. But at the same time, the expectations of people who pay for them are often quite simple.
When the worst happens, they expect their claim to be dealt with quickly and fairly.
If they disagree with how a claim has been handled, they expect you to resolve their complaint in a fair and timely way.
And if they are experiencing vulnerability or hardship, they expect to be treated with sensitivity, empathy and flexibility.
Every insurer has the potential to exceed those expectations.
Equally, every insurer can fall short in some cases.
Where we currently see an opportunity for improvement is consistency in the way in which insurers respond to those expectations.
Expectation 1: Claims handling
As I said, one area where we see there being opportunity for continued improvement is in relation to claims handling. That should not come as a surprise, because claims handling has been a core priority for ASIC for some time.
In identifying that, I would note that one in 10 complaints made to AFCA last year related to claims handling delays[1].
That was particularly disappointing, given that our review of home insurance claims handling (REP 768), released in August 2023, had identified three areas for improvement, in particular:
- better communications
- better project management and oversight of third parties, and
- better identification and treatment of vulnerable customers.
We note since our review, insurers have boosted their claims handling resourcing with temporary staff.
But we need to see a sustained effort to improve resourcing for the handling of claims, regardless of whether they come as part of business as usual or in response to a major natural disaster.
Expectation 2: Dispute resolution
The second area I mentioned was in relation to dispute resolution.
When things go wrong, we see complaints as an opportunity to reset the course and get back on track.
In Report 768, we expressed concerns about levels of resourcing for dispute resolution across general insurers.
We’ve been gathering data on resourcing in the period since, which shows that increases in internal dispute resolution resourcing have not matched the rate of increases in complaints – and quite frankly, too many complaints are still making their way through to AFCA.
We acknowledge that those cases can be complex, but four in 10 of the complaints made to AFCA about CAT221 were resolved at the very earliest stage[2]. This suggests that many of them could have been resolved in-house, much earlier, which would have been better for the consumer and for the insurers.
We’ve recently collected data using our compulsory notice powers to assess general insurers’ compliance with their dispute resolution obligations, as set out in RG 271 – our regulatory guidance on internal dispute resolution, which has a number of mandatory provisions. We expect to publish our findings from this review towards the end of this calendar year.
Alongside that, insurers are also now required to report to ASIC every six months on their internal dispute resolution data. We will soon be publishing some initial insights from that data collection across the financial services sector.
It’s important to note that next year, it’s our intention to move towards more granular reporting of that data at a firm level, with the expectation that the additional transparency this provides will drive improvements in the way in which individual firms manage their complaints.
Expectation 3: Consumer vulnerability
Finally, we are particularly concerned about the way businesses respond to people experiencing vulnerability.
Our review last year suggested that some insurers were systematically under-identifying vulnerability in home insurance claims.
Identifying vulnerability is a critical first step in being able to respond effectively.
This is in a context where I think it is fair to say that there is an increasing community and parliamentary expectation around how major financial firms in general respond to customer vulnerability.
I would expect those expectations to continue to rise – so the more work insurers can do on this now, the better prepared you’ll be to respond to those increasing pressures.
In terms of what we mean by vulnerability, at ASIC it’s our view that anyone can become vulnerable – at any point and for any reason.
Many of the customers that your teams deal with day-to-day fall into this category – not because of some inherent characteristics of who they are necessarily, but perhaps because of where they are at in that moment.
They might have lost their home.
They might be in an abusive situation or relationship.
Or they might be dealing with the psychological and social impacts of a major event.
We expect insurers to be proactively looking for signs of vulnerability and responding appropriately to individuals experiencing it.
Insurers should expect the way in which they respond to vulnerability of customers to be an area of continued interest to ASIC in our regulatory and enforcement work.
Conclusion
I would like to end with a note about the current floods inquiry – and in particular about the hundreds of Australians have who shared their stories through it.
ASIC has followed that inquiry really closely but our interest won’t end with the publication of the report, which is anticipated on Friday.
We remain concerned about the number of claims still outstanding from 2022 events.
We do acknowledge that almost 99% of those claims from CAT221 have been closed[3]. That’s no small feat.
But at the same time, the near 1% still outstanding equates to more than 1,800 claims.
Each unresolved claim represents an individual or family who can’t move on with their lives. We feel that it is time to give them closure.
As I noted earlier, insurance is complex - we understand that - but your customers’ expectations are often quite simple. Listening and responding to those expectations is critical to rebuilding trust and confidence in the industry – and to giving your customers the consistently good experience that they deserve.
Thank you.
[1] https://www.afca.org.au/news/media-releases/financial-complaints-rise-further-9-to-record-105000-in-2023-24
[2] REP 768 Navigating the storm: ASIC's review of home insurance claims
[3] Catastrophe 221: Storms in South East QLD and Northern NSW - Insurance Council of Australia
