Floods inquiry given mandate for ‘pragmatic’ answers
Emotions may run high as a Federal Government parliamentary inquiry into insurer responses to record-breaking floods hears accounts of experiences, but Assistant Treasurer Stephen Jones has stressed that it will be more than an exercise in venting.
“A lot of people will look at this and say, ‘Great, this is an opportunity to throw some bombs at the insurance industry’, and I’m sure a bit of that will happen,” he told ABC News Breakfast last week.
“But frankly what I’m after is some pragmatic recommendations that government, that industry, that individuals can take up, and we can say, ‘This will deal with affordability or help. This will help deal with risk mitigation and these recommendations will make the claims handling and resolution process work more effectively’.”
The Government last week released the inquiry terms of reference, with the Standing Committee on Economics expected to visit communities, receive submissions and conduct hearings before delivering a final report in the third quarter of next year.
The consumer-focused review will consider: policyholder experiences before, during and after making claims; different types of contracts offered and held; claim resolution timeframes and obstacles including factors internal to insurers and external, such as access to disaster-hit regions, temporary accommodation, labour market conditions and supply chains.
The review will look at communication with policyholders; accessibility and affordability of hydrology reports and assessments to policyholders; affordability; claimants’ and insurers’ experience of internal dispute resolution processes; and the impact of land use planning decisions and disaster mitigation efforts on the availability and affordability of insurance.
The inquiry will have regard to insurer preparedness for future floods and will take into consideration findings from reports, such as the Insurance Council of Australia-commissioned Deloitte report on their response and an Australian Securities and Investments Commission claims handling review
The parliamentary inquiry comes after Australian Financial Complaints Authority (AFCA) data shows complaints about insurance claim handling delays jumped 76% in the year to June to be the most raised issue across financial services.
AFCA says 10,996 complaints about delays in claim handling were lodged – representing 11.3% of a record 96,987 complaints across insurance, banking, superannuation and other financial services.
While flood responses have gained much of the attention, issues following the record-breaking events have cascaded to affect insurer handling of claims across their businesses.
“We recognise there are a range of challenges, but we also believe insurers can do more to improve claims handling and their own internal dispute resolution processes,” Chief Ombudsman David Locke says.
“Our hope is that the result will be fewer general insurance complaints coming through to us over the next year, with insurers able to resolve issues directly and efficiently with their customers.”
Consumer Action Law Centre Managing Lawyer Philippa Heir says it’s encouraging that the parliamentary inquiry is happening and that it’s focusing on the experience of the insured.
“I think it’s important the inquiry examines the conduct of insurers to make sure they are complying with their obligations and that they are communicating with their customers effectively and with empathy,” she told insuranceNEWS.com.au.
“The focus and scrutiny on customer complaints is good, as the industry has to lift its game following the increase in complaints to AFCA.”
Frustrations among consumers also reflect concerns about rising premiums and affordability of cover, at the same time as policyholders are generally under pressure due to the rising cost of living.
ICA says there are three main drivers of the current cycle of premium increases: the impact of extreme weather events, inflation, and the rising global market reinsurance costs.
Any review that supports the ability of insurers to improve how they carry out their function and assist communities get back on their feet after disasters is welcome, it says, while action to improve resilience remains vital looking ahead.
“The terms of reference also include land use planning and disaster mitigation, which are critical to improving insurance affordability in the long-term,” an ICA spokesperson says.
“We strongly support the Albanese Government’s focus on improving the resilience of Australian homes and communities against extreme weather events, but more needs to be done to ensure insurance remains sustainable as the climate worsens.”
The Federal Government has boosted mitigation spending and is working more closely with the industry through the Hazards Insurance Partnership, and doesn’t want to be increasingly picking up surging costs after disasters.
“Insurance is about self-help, insurance is about people individually looking after the risks involved in their business and their home affairs, and when that doesn't happen the cost is borne by the greater community, frankly,” Mr Jones told the ABC.
The inquiry’s breadth extends across the southeast Queensland and northern NSW catastrophe in February and March last year, the Hunter and greater Sydney floods in July, the Victorian, NSW and Tasmanian floods of October and the central west NSW floods in November and December.
The process will ideally lead to improvements ahead of future catastrophes and better planning for the future, but insurers are in for some intense scrutiny as shortcomings are examined and consideration given to the eventual recommendations.