ASIC blasts dispute resolution processes at home, contents and car insurers as customer complaints surge

The Federal financial services watchdog has blasted complaints handling at insurance companies amid a surge in customers crying foul about their treatment. The Australian Securities and Investments Commission claims insurers have “immature systems” for handling and reporting complaints, as well as was “significant variability” in the way they communicate with customers. ASIC found big variations in the quality of internal dispute resolution processes, with the extent of non-compliance ranging from 3 per cent to 35 per cent of complaints at 11 big car, building and contents insurers. ASIC commissioner Alan Kirkland described the latest findings as disappointing given insurers were reminded to improve their internal processes in the aftermath of the 2022 floods in Queensland and NSW. “It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced,” Mr Kirkland said. “When insurers fail to identify complaints, they risk prolonging the distress of customers, especially those dealing with extreme events like floods.” Regulators are stepping up their scrutiny of general insurers as the Australian Financial Complaints Authority grapples with a doubling of customer grievances filed over the past three financial years. ASIC concedes the 2022 floods were partially to blame for a 50 per cent spike in complaints to AFCA in 2022-23. But with motor insurance complaints continuing to climb in 2023-24, ASIC claims many issues should have been resolved through internal dispute resolution processes before they became a matter for AFCA. The regulator released strengthened guidelines for internal processes in September 2021. It told financial services firms that fair, timely and effective dispute resolution were an essential part of Australia’s consumer protection framework. ASIC commissioner Alan Kirkland described the latest findings as disappointing given insurers were reminded to improve their internal processes in the aftermath of the 2022 floods in Queensland and NSW. “It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced,” Mr Kirkland said. “When insurers fail to identify complaints, they risk prolonging the distress of customers, especially those dealing with extreme events like floods.” ASIC said in the 2021 guidelines that it expected financial service providers to take a proactive approach to identifying complaints. This included the provider potentially activating dispute resolution processes where customers expressed dissatisfaction in a way that implied the expectation of a response or a specific action. “A consumer or small business is not required to expressly state the word ‘complaint’ or ‘dispute’, or put their complaint in writing, to trigger a financial firm’s obligation.,” according to the 2021 guidelines. The latest ASIC review found insurers were failing to identify one in six customer complaints and 50 per cent of insurers were failing to identify systemic issues. Mr Kirkland said proactively identifying and addressing systemic issues was critical to “preventing the same consumers from experiencing the same problems”. “It also reduces downstream remediation and business costs, benefiting both insurers and their customers,” he said. “Insurers should prioritise building a positive complaints management culture that values and learns from customer complaints and prevents problems from recurring.”