The Financial Rights Legal Centre (FRLC) is warning consumers of widespread poor data handling throughout the insurance industry, impacting how claims are accepted or denied, according to its new research.
Drew MacRae, senior policy officer at FRLC, said purchasing an insurance product requires the consumer to disclose prior insurance claims. Reports are provided by the Insurance Council of Australia (ICA) through a subsidiary called Insurance Reference Services (IRS).
However, obtaining the IRS report involves a multi-step process that can be heavily bureaucratic, it is believed. Consumers can also opt to access their insurance history from the central database for $22.
“I was gobsmacked at how bad the quality of the data and the process was,” MacRae said. “Frankly, I thought the insurance sector at its heart is about data, it’s about being able to calculate risk and it should be their bread and butter, so I was a bit surprised to see how poor the data standards were.”
“Our research has found the data-handling practices of insurers and their central database is not up to scratch,” MacRae added. “Because it’s hard to get and error-ridden, there is a giant question mark as to whether people are potentially not fulfilling their disclosure requirements.”
Researchers also found that the data retrieved can sometimes be “unintelligible and unexplained”. Becoming a victim of administrative errors could affect disclosure requirements, which increases the likelihood of denied claims in the future.
“Some of them we literally got…one line with three points of information and others…got 170 pages,” MacRae said. “In the data world, with insurance, you either get minimal information, like a skerrick of information, or you get a whole lot, and you have no idea what to do with it. And I just think that needs to be sorted.”
The FRLC is also calling on the industry to enhance data standards and act ahead of the Consumer Data Right (CDR) expansion to the general insurance sector. The CDR makes it easier for service providers to share and access data, allowing customers to have more control over their personal information. It is already being used in the banking and utilities sector.
A spokesperson from ICA said the organisation was already working on improving the IRS service, promising that the IRS and its 16 members are “well advanced in a significant data improvement program in 2022 to…address many of the points raised in the FRLC report.” They also acknowledged the need for new policies around the proposed introduction of the CDR to general insurance.
