ASIC letter spells out expectations ahead of high-risk summer

The Australian Securities and Investments Commission (ASIC) has written to insurers warning they should be prepared, proactive, transparent, consumer-centric and responsive in dealing with claims as they face a summer that’s likely to continue the recent heightened pattern of severe weather events.

The letter to directors says this summer is set for a continuation of La Nina conditions, with severe weather increasing in severity and frequency.

“As these events are expected to lead to increased claim numbers, it is an appropriate time for ASIC to restate our expectations in this area,” Senior Executive Leader, Insurers Rhys Bollen writes.

Expectations include that insurers will have adequately resourced and trained teams of claims handlers, complaints managers, assessors and other service providers.

Insurers should inform consumers about their policy coverage, including exclusions or optional benefits, when they lodge a claim or make an inquiry, explain the process, provide realistic expectations about progress, facilitate communication between consumers, experts and tradespeople and provide regular updates, it says.

Consumer-centric approaches should ensure that products are designed to meet the needs of consumers in regions prone to severe weather and that they are fit-for-purpose, providing adequate cover in times of need, including for appropriate temporary accommodation and other costs such as debris removal in addition to the sum insured amount.

The letter says insurers should simplify the claims process as much as possible by reducing paperwork and they should be generous about side benefits like temporary accommodation, for example by paying the maximum benefit flexibly at the outset of any claims assessed as a significant or total loss.

ASIC expects insurers will review and refine response processes, continue to invest in systems to accurately record claims information and continue to invest in increased capacity and resources to deal with severe weather events.

The regulator says significant pressures in claims handling and dispute resolution appear to be a widespread and ongoing issue following a series of natural catastrophes and insurers should consider whether “a permanent uplift” in resourcing is needed.

“We look forward to seeing general insurers continue to improve their claims handling practices in response to severe weather events, and to embed consumer-centric practices for what appears to be the ‘new normal’,” Dr Bollen says.

ASIC Deputy Chair Karen Chester told the Insurance Council of Australia annual conference last week that the regulator was conducting a review of claims handling practices “to set a baseline of insurer conduct” against obligations, with findings set to be communicated by the middle of next year.

Preliminary observations highlighted in the letter include that consumers often don’t understand the extent of their cover or the process of making a claim, and that third parties engaged by the insurer have the power to “make or break” the claims experience.

“Insurers need to be confident in their third-party partners and proactively project manage the claims process,” Dr Bollen says.

You can read the letter here.