The General Insurance Code Governance Committee (GICGC) opened 170 investigations into insurance companies during the last financial year. The large number is actually fewer than in 2020-21, when the GICGC looked at 195, according to the Governance Committee’s recently released annual report.
“I think it’s [the high number] got to be kept in perspective,” said Prue Monument (pictured above) general manager of the GICC’s Code Compliance and Monitoring, a separately operated unit of the Australian Financial Complaints Authority (AFCA).
“Obviously, when a consumer comes to us the team does have a look at the matter closely but often after we engage with an insurer we’re able to resolve the issue and move forward and it’s only a small number that are found to have had a breach,” she said.
The General Insurance Code of Practice allows anyone to report an alleged breach of the Code to AFCA at any time. Rather than the breaches that are self-reported by insurance companies, these breaches are referred to as committee-determined breaches.
“It does seem like a high number,” said Monument. “But some of those can be quite quick to resolve once we look in a little bit more detail at the issue.”
Only 17 breaches were identified, she said, out of the 170 matters looked at.
“So in the most part, through those concerns we receive, we are not uncovering a high number of breach concerns,” said Monument.
Most of the breaches, she said, related to the complaints and dispute handling obligations of the Code.
“Ten (10) of them related to those matters,” she said. “Four related to financial hardship standards and a couple were about purchasing insurance and one regarding vulnerability obligations.”
According to the annual report, most of the complaints – 84 – that led to investigations were from consumers, 39 were referrals from AFCA, 26 from consumer advocate organisations. Fifteen (15) were reported by subscribers and the remaining six were identified by the Code team.
“The investigation work is vital in keeping insurers accountable,” said GICGC chair, Veronique Ingram. “It is this work that pursues high standards of practice in the industry and ensures good outcomes for consumers.”
The Committee closed a total of 243 investigations in 2021-22.
The GICGC’s annual report also drew attention to a “substantial increase” in significant breaches of the Code of Practice. These breaches are self-reported by insurance companies.
According to the report, 22 insurance companies reported a total of 116 significant breaches, up from 57 in 2020–21. The breaches affected over 1.7 million consumers, said the report, and resulted in remediation payments of more than $52 million.
“Timely communication obligations are the most commonly breached standards we’re seeing,” said Monument. According to the GICGC’s media release, large numbers were also related to overcharging customers and pricing errors.
“There are a lot of reasons why we can see breach numbers go up, so I don’t think there’s necessarily a definitive answer,” said Monument.
She said her Monitoring Team believe there are key factors driving up the breaches.
“Firstly, we know that there’s been a significant investment by the industry to improve their breach identification, recording and reporting,” said Monument. “That’s a good thing.”
She said if insurers can better identify where their problems are occurring then they can proactively fix them. “That’s good for business and that’s good for consumers,” said Monument.
She said the figures for 2021-22 don’t mean there are necessarily more breaches actually occurring. In many cases, the jump upwards in breaches, she said, is a sign that the industry is getting better at identifying and reporting them.
“So over time, through that process, we might start to see breach reports come down,” said Monument. However, she said the lack of timeliness and poor communication around claims handling is a key issue.
“We know there are a range of challenges at the moment: increased catastrophes, supply chain issues and a tight labour market,” said Monument. “That said, the Code breach data has been showing a declining performance around timeliness and communication prior to these more recent challenges.”
She said insurers need to do “a lot of work” to address these issues.
One factor playing into the dramatic rise in significant breaches could be the end of border restrictions, lockdowns and other significant COVID-19 restrictions resulting in a natural rise in claims.
The GICGC data for July 1, 2019, to June 30, 2020 – a time period that, similar to the recent annual report, was mostly free of COVID-19 impacts - showed 112 significant breaches of the Code, very close to 2021-22’s.
