AFCA 'concerned' as disasters drive complaints surge

Flooding, storms and the Victorian earthquake have contributed to a surge in insurance complaints lodged with the Australian Financial Complaints Authority (AFCA) last financial year.

General insurance complaints rose to 18,563 from 16,912 and life complaints increased to 2482 from 1623. The top four insurers together accounted for about 9400 complaints, up 19%, with claim handling delays a key issue in home building, contents and motor.

Overall, AFCA received 72,358 complaints against banks, insurers, super funds, investment firms and financial advisers, up 3% on the previous year, with those generated by natural disasters rising from 653 to 1586.

Catastrophes during year included the September earthquake, storms and flooding across southern states in October and the following record-breaking Queensland/NSW floods, and AFCA has acknowledged insurers face challenges trying to manage claims and get people back on their feet.

“We know there are significant issues with the supply of things like building materials, parts and labour because of national and global events outside their control,” Chief Ombudsman David Locke said. “Notwithstanding this, we are concerned at the rise in complaints being escalated to AFCA.”

Mr Locke says AFCA wants to better understand the causes of complaints and “is eager to work with insurers to help them resolve disputes more quickly and, ultimately, to prevent them”.

Across all areas, the top five most commonly complained about products were credit cards (9153), personal transactions (7416), home loans (6439), home building insurance (6120) and comprehensive motor insurance (5791).

Natural disasters pushed home building insurance into the top five, with an increase of about 73% from the previous year’s 3527, and drove a rise of about 30% in motor complaints.

Delay in claim handling was the top general insurance issue, with complaints rising 54% to 4804. The claim amount (3747), denial of claim related to an exclusion or condition (3111), denial of claim (2125) and service quality (1503) were also common dispute triggers.

Across financial services, complaint resolution took an average 72 days, down from 76 days. Some 67% were resolved by agreement between the firm and the consumer, while about half were resolved at the first stage of the AFCA process, where a complaint is referred back to the firm for further consideration.

Complainants secured more than $200 million in compensation and refunds last financial year, while AFCA investigations into systemic issues resulted in remediation payments to consumers totalling more than $18 million.

The Insurance Council of Australia says the industry continues to support the recovery of affected property owners and communities from the widespread destruction of extreme weather events of the past year. The floods earlier this year alone have led to more than 225,000 claims, costing an estimated $4.83 billion in insured damages.

“Insurers are working hard to resolve claims as quickly as possible and have put on hundreds of extra staff to support claims processing,” a spokesperson told insuranceNEWS.com.au.

“The Insurance Council and insurers continue to collaborate with AFCA through in-person and online community forums, and to gain insights into opportunities for enhanced and quicker complaints resolution.”