01.Industry self regulation not the answer
The insurance industry says many of the recommendations that came out of the government’s inquiry into its handling of recent natural disasters earlier this week were put forth by industry itself last year.
CHOICE questions whether the industry’s moves so far have meant better protection for consumers.
In releasing the House of Representatives Social Policy and Legal Affairs Committee’s report, “The operation of the insurance industry during disaster events”, Committee Chair Graham Perrett MP said the inquiry was held “in response to the deluge of complaints about the insurance industry that was falling on deaf ears”.
He also made the point that the self-regulated industry is answerable only to itself, saying “unfortunately there are no regulations that compel insurance companies to do the right thing by their clients and resolve claims in a timely and satisfactory fashion.”
Dealing with over 275,000 claims in a single year was bound to leave the industry overstretched, but we think many of the proposed changes should have been in place before the major events of 2011. It was a record-breaking year for claims, but hardly the first large-scale run of disasters to affect policyholders and test the industry.
Recommendations from inquiry
The 13 recommendations by government include:
- New legislation that increases consumer protections in claims-handling and settlement;
- Government should work closely with the Insurance Council of Australia (ICA) to strengthen its Code of Practice, particularly for times of natural disasters, and to make the Code of Practice compulsory;
- Empower the Australian Securities and Investments Commission to ‘name and shame’ insurers who breach the Code of Practice;
- Continued funding for insurance law services to operate in areas affected by disaster events and for a consumer advisory position in the Financial Ombudsman Service.
- Address the rising costs and potential market failure of insurance premiums.
Changes to code
Early last month the ICA made changes to the General Insurance Code of Practice that addressed the concerns of consumer groups like CHOICE. The changes related to the critical post-disaster areas of claims-handling timetables, external expert reports and a new “right to claim”.
Further, the industry says it has committed to releasing future Code Compliance Committee reports that describe significant breaches of the Code by insurers. We welcome these overdue steps but also recognise that many insurers have met, and sometimes exceeded, the expectations of policyholders.
“Last year, despite the fact insurers operated in extremely tough conditions and were handling thousands of calls every day, catastrophe claims were finalised on average in 29 days,” said ICA Chief Executive Rob Whelan.
“The facts show that the industry pulled out all stops to help those affected and extra claims handling and assessment staff were drafted in, with many working round the clock to ensure claims were processed.”
Given the industry’s avowed commitment to doing right by policyholders, taking the government’s proposals on board can only be a good thing for all concerned.
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