/>iASIC has recently published its findings following an investigation into the insurance industry’s level of compliance with internal dispute resolution (IDR) obligations. Report 802 Cause for complaint: Complaints handling in general insurance revealed that general insurers are consistently falling short of their legal obligations thereby limiting customers’ ability to access fair, timely and effective IDR processes.
IDR Obligations
ASIC Regulatory Guide 271 (RG 271) imposes enforceable IDR obligations on insurance providers. Complaints handling mechanisms must provide for the proactive identification of customer complaints and accurate recording of all complaints received. Complaint responses must include prescribed information such as information regarding the customer’s right to escalate the matter to the Australian Financial Complaints Authority (AFCA) and AFCA’s contact details and comprehensive reasons where a complaint has been rejected. For most complaints, a written response must be provided within 30 calendar days. However, where, due to the complexity of the complaint or circumstances beyond the insurer’s control, a response is unable to be provided within this time, a delay notification must be provided to the customer, informing them of the reasons for the delay and their right to escalate the complaint to AFCA.
ASIC’s Findings
| Key Obligation | Results |
|---|---|
| Identification and reporting of complaints | ASIC found that insurers failed to identify 1 in 6 complaints, denying customers access to IDR processes. Of the 11 insurers reviewed, nearly 50% were unable to identify a single systemic issue (despite AFCA identifying 11 systemic issues from the 16,000 insurance complaints which proceeded to external dispute resolution (EDR)). |
| Communication to customers | Despite IDR guidance directing insurers to acknowledge complaints within 24 hours of receipt, one insurer could only provide a record of acknowledgement for 60% of complaints received. Additionally, compliance with content requirements was poor across the board with 1 in 8 responses for rejected complaints and 1 in 5 delay notifications failing to meet minimum information standards. |
| Timeliness of complaints handling | All insurers failed to meet timelines required under RG 271. Nine of the eleven insurers reviewed were late providing delay notifications one third of the time, with the worst performing insurer failing to meet timeframes more than 90% of the time. Further, almost all insurers failed to record when agreed complaint outcomes were actually performed, making it impossible to determine whether such outcomes were implemented in a timely manner. |
Takeaways
ASIC’s findings demonstrate that insurers are consistently failing to comply with their obligations under RG 271. What is most concerning is that many enforceable obligations contained in RG 271 have been repeatedly ignored by licensees. While the review was limited to general insurers, ASIC noted the relevance of its finding to all financial firms. Entities bound by RG 271 must develop and implement action plans to promote compliance with their IDR obligations. Appropriate mechanisms should foster a positive complaints management culture which seeks to achieve better outcomes for customers.
Tamsyn Sharpe contributed to this article
