Insurers are failing to identify one in six customer complaints, effectively denying those Australians critical protections available through the Internal Dispute Resolution (IDR) regime, an ASIC review has found.

ASIC’s review of the IDR practices of 11 general insurers highlighted shortcomings in several areas, including the failure to identify complaints and systemic issues, as well as inadequate communications to customers.

ASIC’s analysis of insurance complaints handling comes as the volume of general insurance complaints made to the Australian Financial Complaints Authority (AFCA) swelled by 50% in the 2022-23 financial year, and rose again in 2023-24.

ASIC Commissioner Alan Kirkland said, ‘Consumers have a right to expect that their complaints will be identified and handled in a fair, timely and effective manner. When things go wrong, the complaints process provides an opportunity to get them back on track.

‘When insurers fail to identify complaints, they risk prolonging the distress of customers, especially those dealing with extreme events like floods. This failure denies customers access to important protections, including the right to escalate a complaint to AFCA for independent review.’

ASIC’s review found insurers also failed to adequately identify systemic issues – issues that involve multiple customers. Insurers identified systemic issues at a much lower rate than AFCA, finding only 85 systemic issues from over 1.4 million complaints compared to 11 systemic issues identified by AFCA from only 16,000 external dispute resolution complaints. Further, nearly 50% of insurers failed to identify any systemic issues.

‘Proactively identifying and addressing systemic issues is critical to preventing other consumers from experiencing the same problems. It also reduces downstream remediation and business costs, benefiting both insurers and their customers,’ Commissioner Kirkland said.

ASIC also found that immature IDR systems and processes contributed to poor complaints handling and reporting. There was also significant variability in insurers’ communication practices.

Commissioner Kirkland said the issues highlighted in ASIC’s review were disappointing, particularly as insurers were told to improve their IDR practices following an ASIC review of claims handling in the aftermath of the 2022 Queensland and New South Wales floods.

‘It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced. Insurers should prioritise building a positive complaints management culture that values and learns from customer complaints and prevents problems from recurring,’ concluded Commissioner Kirkland.

ASIC expects all insurers to act on the findings outlined in this report and take steps to uplift their approach to complaints handling. ASIC will ask the insurers in the review to prepare an action plan to explain how they will address these issues and better support their customers.

Downloads

• REP 802 Cause for complaint: Complaints handling in general insurance
• ASIC’s review of general insurance complaints infographic (PDF 471 KB)

Background

ASIC’s review focused on how general insurers are complying with select enforceable obligations in Regulatory Guide 271 Internal dispute resolution (RG 271). ASIC assessed insurers’ policies, procedures, and internal reporting, analysed over 1.4 million complaints and assessed more than 36.9 million data points, and conducted meetings with more than 60 staff. The review covered the period between 1 January 2022 (1 January 2023 for data) and 27 March 2024.

ASIC found that one in six complaints were not identified and recorded after asking insurers to conduct a self-assessment of a sample of contact centre records for a four-day period.

RG 271 defines a ‘systemic issue’ as a matter that affects, or has the potential to affect, more than one consumer.

The insurers that participated in the review are:

• AAI Limited
• Allianz Australia Insurance Limited
• Hallmark General Insurance Company Ltd
• The Hollard Insurance Company Pty Ltd
• Hollard Insurance Partners Limited
• Insurance Australia Limited
• Insurance Manufacturers of Australia Pty Limited
• QBE Insurance (Australia) Limited
• RAA Insurance Limited
• RACQ Insurance Limited
• Youi Pty Ltd

Generally, customers making a complaint with their insurer should receive a response within 30 calendar days. Customers who are not satisfied with the outcome of the internal review, can escalate their complaint to AFCA. Learn more about the steps on ASIC’s Moneysmart website, which features information that supports Australians in making decisions about their money.

This week, ASIC released its first publication of industry-wide data reported from 1 July 2023 to 30 June 2024 under the IDR data reporting framework. Of over 4.7 million complaints reported by financial firms of all types, general insurance products were subject to the most complaints, accounting for 33% of the total (refer 24-264MR).