Claims handling is a critical insurance industry service. Since January last year, insurers or anyone acting on their behalf involved in the claims area has been required to hold an Australian financial services (AFS) licence. In order to help the industry’s wide range of companies offer consistently high quality claims handling, the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) is driving the push for a claims handling professional framework.
In an upcoming podcast interview with IB Talk, Prue Willsford (pictured above), CEO of ANZIIF, said establishing this framework with industry stakeholders is one of the tasks she’s most looking forward to in 2023. Willsford highlighted a couple of important elements in the process of developing this framework.
“One is having had conversations with a broad range of industry there is clearly a need for us as an industry to say: ‘This is what good looks like at a minimum through the claims handling value chain,’” she said. “It’s important that we do that ourselves and then roll that out to our employees and also our regulators and our supply chain because owning what good looks like is important.”
As the insurance industry’s professional association, ANZIIF’s mission, as stated on its website, is to lead and engage industry through education and the promotion of professional standards. The organisation has about 20,000 members in 50 countries, predominantly in Australia and New Zealand.
“I think there is no-one else in industry who has the combination of the perspective and the authority to actually drive collaborations of that nature,” said Willsford. “So that is part of the reason why having a professional association is an important part of the insurance landscape.”
Last year, more than six months into the implementation of the Australian Securities and Investments Commission’s (ASIC) AFS requirement for claims handling, IB reported that insurance companies were facing challenges complying with the new obligations.
Yvonne Lam, special counsel with Clyde & Co, a global law firm with a focus on insurance services, told IB that compliance is “not just a tick a box exercise.”
Lam said it is important that personnel are well trained and understand what to do. She gave the example of the technologies that can send alerts to help insurers track the timeliness of responses to current claims.
“You have to make sure you have systems technology in the front end,” she said. “Then you have to make sure your staff are actually trained up and understand what these new obligations mean for them in a day-to-day capacity.”
Staff, she said, need to understand what actions to take when a claims or complaints issue is “not quite business as usual.” This includes, she said, how to engage senior management or potentially escalate the issue up to board level so that “the boards can make the decision about whether to report it to ASIC as an actual or potential breach of the company’s AFS license obligations.”
In the wake of the Hayne Royal Commission, the special counsel said the claims handling reforms were part of ASIC’s bid to remedy loopholes in the law and bring the industry into line with community expectations.
“The Royal Commission showed that you’ve got what the law says and what the compliance requirements are and then there are community expectations on top of that as well,” said Lam.
Lam said that before the reforms, claims handling wasn’t actually defined as a financial service.
“That meant that one part of an insurance business was actually unregulated under the Corporations Act,” she explained.
Lam said, until the reforms, the “regulatory rigour” around claims was less mature and prescriptive than for other parts of the insurance business and without the same compliance requirements.
Unlike underwriting or distribution services that required an AFS license, Lam said the assumption was that claims handling was covered by protections under the duty of utmost good faith, a legal requirement in insurance contracts.
In 2021, before the claims handling reforms came into effect, ANZIIF and the Insurance Council of Australia (ICA) were warning industry stakeholders to be prepared.
At that time, the ICA described lodging licence applications as “an immediate and most important priority”.
ANZIIF regards its drive for a claims handling professional framework as part of further efforts to improve industry standards and help members and stakeholders comply with their claims handling obligations.
