'Biggest trauma': claimants lash out over insurer processes

Melbourne academics who interviewed 30 policyholders undertaking legal advice over their claims outcomes say “arduous and confusing” insurer handling processes may not comply with the industry code of practice.

The top complaint was poor communication, with one claimant allocated eight different case managers. Also causing anxiety were delays, obscure policy wording, “loopholes”, inadequate cash settlements and “just layers of buffer”.

The 30 claimants polled had experienced property damage from storms, hail, floods, bushfires or lightning strikes in recent years, and had sought legal advice when left unsatisfied with claims outcomes.

Nine had claims’ denied, while the others had mostly accepted cash settlements but said the amounts were “a far cry” from local trade quotes. Twenty reported delays of more than six months.

The Melbourne Law School academics say extended and onerous claims processes “fail to deliver on policyholders’ expectations of protection and peace of mind”.

“For some survivors, being subject to a prolonged and ‘adversarial’ claims process can be the most distressing element of their recovery,” the research paper said.

Lengthy and exhausting negotiations with insurers and excessive document requests can have “profound impacts” on health, finances, and levels of trust in insurers.

“Our findings raise questions about the extent to which insurers’ claims handling processes and outcomes are consistent with (Code of Conduct) requirements that call on insurers to respond efficiently, professionally, practically, and compassionately when and after disaster strikes.”

The academics say there is “clearly scope for insurers to review disaster claims handling processes to re-centre the experiences of policyholders as survivors navigating multiple stressors.”

It also wants reforms requiring insurers to provide information so policyholders can determine whether to accept a cash settlement offer, calling out “distant and opaque” machinations when insurers calculate liability.

The study identifies an “urgent need” to reduce the burden of following up claims progress – likely requiring that insurers “employ and appropriately train more staff” after disasters. Those who had to explain their story “over and over again” as they were passed from one staff member to another described it as an “arduous and confusing task”.

“The absence of any dedicated person with knowledge of their claims added significantly to participants’ distress,” it said. In contrast, being able to consistently “feel heard” made a significant difference to perceptions of the claims process – regardless of outcome.

The Insurance Council of Australia (ICA) tells insuranceNEWS.com.au every effort is made to scale up resources and prioritise after disasters.

“Understandably, waiting for a decision to be made on an insurance claim can add to an already stressful period in someone’s life,” an ICA spokesperson said.

The academics highlighted the limited bargaining power of policyholders, many feeling they “had no choice but to accept cash settlements they knew to be inadequate”.

They also refer to the “fantasy of a replaceable totality,” though disillusionment in the “promise” of insurance was found to be unlikely to prompt most policyholders to forego insurance.

“A lack of trust in insurers can coexist with a perceived obligation to remain insured,” they said.

Among anecdotes shared with researchers were spending six hours on the phone with seven different people but “not being able to get any information from anyone,” living in cars or tents with limited access to communications, daily appointments with builders, electricians and roofers, eight unsuccessful make-safe jobs performed on one roof, and waiting months to receive just ten days’ accommodation after bushfire, or approval for only three nights’ accommodation at a time.

One participant who suffered a total loss in bushfires said while the “actual event is traumatic, the worst by far is dealing with insurance … and trying to get your life back”.

Another said her claims process was “the biggest trauma” and “the fire was nothing compared with what I went through with that”.

The researchers concede the study is not representative because of the small sample size and focus on claimants whose experiences were “sufficiently negative” to warrant seeking legal advice.

But they identified “an inevitable disconnect between the promises of protection and peace of mind as understood by policyholders, and what insurers can actually deliver in the wake of disaster”.

It may be impossible, they say, for insurers to avoid delays within flood or bushfire-affected areas during high demand for third party assessors and tradespeople, or shortages of temporary accommodation.

The study can be accessed here.