AFCA systemic issues report reveals significant problems in insurance claims handling

A key issue is issues with claims handling in home insurance claims. This includes systemic issues in how a financial firm handled home building claims involving mould and unnecessary delays.

For industry participants, Systemic Issues is definitely worth a read but for those with only 2 minutes here are some key highlights:

• AFCA states it identified, investigated and resolved systemic issues that had impacted 187,855 customers!
• Reporting to regulators included 235 matters reported in the first half of the financial year. This included:
  • 1 serious contravention of the law
  • 177 refusals or failures of financial firms to give effect to an AFCA determination

Systemic issues across industry sectors were spread as follows:

• Banking and Finance 22 issues
• General insurance 17 issues
• Life insurance 6 issues
• Investments and advice 1 issue
• Superannuation 9 issues

Improving claims handling in insurance is a key issue

AFCA states:

“Key issues include:

• Failure to assess claims thoroughly, leading to incorrect or unfair decisions.
• Unclear or insufficient communication, causing frustration for customers.
• Delays in processing claims, which can significantly impact customers, particularly in cases involving financial hardship and customers experiencing vulnerabilities."

"Issues Identified AFCA’s complaint data, including several AFCA determinations, highlighted systemic issues in how a financial firm handled complex home building insurance claims involving mould and contaminants. Gaps in the firm’s processes caused:

• Unnecessary delays in assessing and resolving claims.
• Inconvenience and distress for affected policyholders.
• Potential health impacts to customers due to prolonged exposure to hazardous conditions.”

For banking and finance AFCA identified responsible lending practices

This includes an issue where:

“A financial firm did not have adequate processes in place to ensure it was meeting its responsible lending obligations when entering into lease agreements with customers.”

Another key issue was with financial firms implementing determinations

”Addressing Failures in Implementing AFCA Determinations AFCA identified a reoccurrence of a previously investigated issue where a financial firm was failing to give effect to AFCA determinations within the required timeframe. Although the issue had been initially resolved in November 2022, AFCA observed a consistent increase in incidents from April 2023.”

Very interesting findings particularly for home insurance claims handling and in the implementation of determinations in banking and finance.

AFCA Systemic issues Insights report.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• regulatory compliance
• insurance law