The Australian Securities and Investments Commission (ASIC) has found that one in six customer complaints lodged with insurers goes unrecorded, leaving many policyholders without access to the protections provided by the internal dispute resolution (IDR) system.
A recent review by ASIC of complaints handling practices at 11 general insurers revealed persistent issues, including:
The findings were published against a backdrop of rising disputes, with complaints to the Australian Financial Complaints Authority (AFCA) growing by 50% in the 2022-23 financial year and continuing to climb into 2023-24.
General insurance was the most frequently complained-about financial product category in ASIC’s newly released industry-wide data for the 2023-24 financial year. Of the 4.7 million complaints logged by financial services providers, general insurance accounted for 33%.
ASIC commissioner Alan Kirkland emphasised the importance of robust complaints management.
“Consumers have a right to expect that their complaints will be identified and handled in a fair, timely, and effective manner. When things go wrong, the complaints process provides an opportunity to get them back on track,” he said.
He said that failure to identify issues delays resolution and can exacerbate the challenges customers face, particularly during disasters like floods. This also limits customers’ ability to take unresolved disputes to AFCA for independent review.
The report pointed to significant gaps in insurers’ ability to detect systemic issues – problems that affect multiple policyholders.
According to ASIC, the reviewed insurers identified just 85 systemic issues across 1.4 million complaints, compared to 11 systemic issues detected by AFCA from 16,000 external dispute resolution cases.
Additionally, almost half of the insurers involved in the review reported no systemic issues at all during the assessment period.
Kirkland said recognising and addressing systemic issues early is crucial because it not only prevents similar problems for other customers but also helps insurers avoid costly remediation efforts.
The review found that outdated or underdeveloped IDR processes were a major factor behind poor complaints management.
Communication standards varied significantly, with some insurers failing to meet the basic requirements set by ASIC’s Regulatory Guide 271 (RG 271), which mandates minimum standards for complaints handling, including timely responses and accurate record-keeping.
ASIC expressed disappointment at the lack of progress since a 2022 review of flood-related claims handling, which also highlighted weaknesses in the industry.
“It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced. Insurers should prioritise building a positive complaints management culture that values and learns from customer complaints and prevents problems from recurring,” Kirkland said.
In response to its findings, ASIC has directed the insurers involved to create detailed action plans outlining how they will address these deficiencies.
The regulator expects insurers to prioritise reforms that strengthen their IDR frameworks and ensure compliance with regulatory obligations.
The review examined complaints data from January 2022 to March 2024, including an analysis of over 1.4 million complaints and input from more than 60 insurance staff.
A self-assessment exercise conducted by the insurers further revealed that 17% of complaints were not captured within a sample of contact centre interactions.
