The Australian Securities and Investments Commissions (ASIC) says the industry may have to reconsider its claim handling approach as “serial” severe weather events become normal.
Deputy Chair Karen Chester says the industry is facing a “bedrock task” in its efforts to process natural catastrophe claims from the past three years and while insurers have stepped up to the challenge, the surge in delays finalising claims has the regulator concerned.
“Perhaps it’s time to pause and rethink the resourcing of claims handling and dispute resolution,” Ms Chester said in a speech at the Insurance Council of Australia annual conference.
“Is there a need for a structural lift in that resourcing, rather than event or season-driven surge capacity?”
She says the regulator will shortly write to insurance boards to share ASIC’s expectations for claims handling as summer approaches.
ASIC is conducting a review of claims handling practices to set a baseline of insurer conduct against their mandatory obligations and compliance with the industry’s Code of Practice.
“We are focusing directly on the consumer experience, including identifying frictions in claims handling. We expect to communicate our findings by mid-2023,” Ms Chester said.
The industry is dealing with some 234,000 claims from the $5.4 billion NSW/Queensland floods catastrophe earlier this year and also 21,000 claims from the severe storms in NSW in July.
On top of that, last month’s flood catastrophe in NSW, Victoria and northern Tasmania, along with claims from bushfires, cyclones and floods in the last three years have revealed pressure points that need addressing.
“There are still outstanding claims remaining from 2021,” Ms Chester said. “Internal and external dispute resolution is under pressure. We continue to see increases in complaints received in the general insurance space.”
She says the industry should also consider improvements in product design and communication as a way of alleviating claims pressure.
“Consider whether you can better design products to assist people in high-risk communities,” she said.
“The complex challenge of improving product design for the here and now pressure and longer term will take a collective effort from the industry.”