General insurers who subscribe to the industry’s code of practice – including home, car and travel insurers – knocked back a total of 143,445 claims in 2015-16, a 14% increase on the previous financial year.
Meanwhile, total claims received – 3,755,643 – rose just two per cent.
Even more worrying for the committee is the year-on-year increase in withdrawn claims, up 29% in 2015-16.
“We are concerned that this trend may point to gaps in consumers’ understanding of the insurance products they are purchasing,” Committee Chair Lynelle Briggs AO said in a letter accompanying the report, implying that policyholders who ended up withdrawing claims initially thought they were covered.
Claims denials were a significant driver of the 32% increase in disputes lodged with insurance companies in 2015-16, the committee found.
Unhappy strata residents
The most jarring statistic in the report is in residential strata insurance: claims denials went up 244% in 2015-16 while disputes lodged with related insurers rose 84%.
Other claims denial highlights:
- Travel insurance – up 28%
- Home insurance – up 9%
- Car insurance – up 9%
- Personal and domestic property insurance – claims denials up 17%; disputes up 352%.
Industry on notice
Overall, it’s a disturbing trend for policyholders. “We remain concerned about continued and substantial increases in both declined and withdrawn retail insurance claims,” Ms Briggs said.
“We have informed code subscribers that they need to do more to identify and understand the factors underlying year on year increases in declined and withdrawn claims data, as it will assist them in reducing consumer dissatisfaction with claim outcomes and help them to identify why so many claims are withdrawn.”
The General Insurance Code Governance Committee was set up in July 2014 to replace the Code Compliance Committee, which monitored the general insurance industry under previous versions of the code of practice.
Nearly all of Australia’s major insurers are signatories to the code.