ASIC slams car insurers for 'harmful' claims investigations


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Regulator ASIC is warning car insurers they can do better when it comes to investigating consumer claims.

An ASIC review of 1.6 million car insurance claims in the 12 months to September 2017 and interviews with more than 50 consumers suggest insurers are investigating claims in ways that are causing "significant consumer harm" and eroding trust in the process.

According to consumers, car insurers are putting them through "harmful and unreasonable" processes when investigating claims.

The corporate watchdog found that when insurers suspect claims are fraudulent, the investigation practices lead to poor consumer outcomes.

While only a small proportion of claims are investigated, more than 70% of the investigated claims are found to be valid and then paid.

This contrasts with a small number of investigated claims being declined due to fraud (4%).

ASIC says consumers feel they are being worn down by a lengthy and confusing investigation process.

Reported poor practices include:

  • Interviews that feel like interrogations, with some investigators suggesting that consumers had fabricated their claim.
  • Interviews in consumers' homes, excessively long or successive interviews, and interviews without notice.
  • Onerous, unexplained and successive requests for a wide range of documents including criminal record checks, social media histories, birth certificates, phone and text message records, financial statements for every bank and loan account, and information about family members and friends.
  • Inadequate extra support, such as consumers with limited English language skills not being offered an interpreter.

While fraud is a serious issue that insurers need to investigate, lengthy investigations impose additional costs that consumers often have to wear.

ASIC is calling on the car insurance industry to implement better standards, improve communication to consumers and review how claims are selected for investigation.

ASIC commissioner Sean Hughes says consumers deserve a fair process for investigated claims.

"Insurers must live up to the promise to pay on the policy where the claim is a genuine one," he says.

Consumers who are unhappy with the way their claim is being handled are encouraged to contact their insurer's internal dispute resolution team.

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Darren Snyder was the managing editor of Money magazine from March 2019 to November 2020. Prior to that he was editor of Financial Standard.