Cyclone Alfred’s impending impact on tens of thousands of residents in Queensland and northern NSW brings the prospect of millions of dollars in property damage costs. The expert reports commissioned by insurers on the damage will determine if many of those claims are accepted and repairs go ahead.
In the wake of the cyclone, the Australian Financial Complaints Authority (AFCA) will likely be watching insurers and their experts closely.
“One of the most common issues we deal with at AFCA is claim denial disputes,” said AFCA’s Chris Liamos (pictured above). “Often we're reviewing expert reports in the context of complaints or disputed issues about what the cause of a loss is.”
Recent government inquiries have also highlighted major issues with the fairness and quality of large numbers of these reports, particularly after major disasters.
A recent webinar, hosted by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), featured Liamos, senior ombudsman for general insurance. He explained key issues driving claims disputes about expert reports and what insurers and experts can do to improve the quality and fairness of these reports.
“One of the most difficult aspects of decision making [in claims disputes], in my experience, is trying to review, weigh and consider expert reports,” he said. “Most of the time the issues are technical, so we're relying on the expert report to identify what the cause of the loss is.”
He said two key issues that often come up in complaints are questions about the expert’s qualifications and independence.
“Is the expert truly independent?” Liamos said. “That can be a vexed issue in quite a number of cases.”
He said “in certain matters” the expert’s independence is very clearly compromised. For example, he said that AFCA has investigated claims disputes where the expert report is from “a friend or a relative” of the insurance professional dealing with the claim.
Liamos said those reports are “not going to be considered independent.”
However, he said that doesn’t mean AFCA dismisses the opinion but “that does lessen the weight typically.”
“We would still weigh up what the opinion is and what are the factors and assumptions and other things that have informed that opinion,” said Liamos.
One common criticism from consumers and consumer advocates is that an expert’s report can’t be independent from insurer influence because the insurer is paying for it.
Liamos disagreed with that view.
“An expert has to be paid by someone,” he said. “I don't think the fact that they've been paid by a particular party means that they're not independent.”
Liamos said most experts operate as a separate business and specialise in providing independent opinions. Typically, he said, that is enough to consider experts independent.
“I say typically, because there might be certain circumstances where we would question it,” said Liamos.
He said one of these circumstances is when experts roam beyond their expertise and give opinions on whether the policy should respond. However, he said insurers have taken feedback on this issue and Liamos said AFCA is now seeing less of this issue appearing in complaints.
He said the qualifications and experience of the expert are “very important.”
“An engineer would generally be more qualified to provide a causation analysis than a builder,” said Liamos. “But it’s not always the case.”
For example, he said, an engineer could be better at a report involving groundwater movement.
“But in contrast, if we're talking about a roof, a roofer or roofing specialist may be better qualified – it depends on the issue,” said Liamos. “In my experience, the key component of a good expert report is the quality of the report more than anything else.”
For example, he said, if an engineer provided very limited details to support his or her groundwater movement analysis but the builder put together a more detailed and logical explanation, the quality of the builder’s report would likely be more convincing.
Detailed and logical reasoning with analysis that supports a conclusion, he said, is “probably the biggest and most important part of a good expert report.” Liamos said AFCA needs to be able to understand “the why.”
“A report that simply provides an opinion with very minimal explanation or reasoning is unlikely to be considered with much weight,” said Liamos. “Particularly if there's a contrary report that is more detailed and analytical and has good reasoning.”
He said a good expert should be able to present a report with key reasoning that can be understood by a layperson.
Liamos said many complaints concern issues around the expert’s “causal links” between damage and what caused it.
“For example, we get cases where they might say, ‘That’s wear and tear and that's the reason for the damage,’” he said. “But there’s not a clear causal link [made] between the two.”
One of the claims disputes he was involved in, he said, involved a leaking shower. In this case, a report (presumably by the claimant’s expert) lacked details.
“The expert identified that there was a leak coming from the bottom of the shower but the damage was to the adjacent wall to the blue bedroom,” said Liamos. “From my reading of that, I could not understand how water tracking from the bottom of the shower could somehow track up and cause damage to the adjacent wall.”
The missing explanation, he said, diminished the weight of this expert opinion.
In December, ANZIIF launched a new short course: Getting it Right: right expert, right job, right time to help insurance professionals choose the right expert for insurance claims, brief them correctly and better understand the reports they provide.
