The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) has recorded its highest-ever number of enquiries and complaints over the past year, signalling increased challenges within the insurance industry.
The scheme – which recently gained high marks for its fairness and professionalism – handled nearly 5,000 enquiries, reflecting a 21% increase from the previous year.
According to Karen Stevens, the Insurance & Financial Services Ombudsman, the bulk of these enquiries centred around customer service issues and delays.
In the period from July 1, 2023, to June 30, 2024, the IFSO Scheme investigated 479 complaints – the highest figure in its nearly three decades of operation. This represents a 46% rise compared to the previous year, which Stevens attributed primarily to the severe weather events of 2023 that led to a surge in insurance claims.
“About 8% of the complaints we received were about insurance claims from the Auckland floods and Cyclone Gabrielle,” Stevens said.
Additionally, there was a notable increase in complaints related to business-as-usual insurance claims, which faced delays due to the nearly 118,000 weather-related claims.
“The extensive nature of the weather events obviously impacted the insurers’ abilities to respond quickly and effectively to claims, and consumers have understandably been frustrated by the long time it’s taken to get their claims resolved,” Stevens said.
On the bright side, insurance claims from the Auckland Anniversary floods and Cyclone Gabrielle are nearing full resolution, with 112,746 out of 118,037 claims already settled by insurance companies as of June 1, 2024.
While the extreme weather conditions slowed insurers’ response times, the industry has made some improvements since the Christchurch earthquakes.
“Insurers have taken less time to process claims than they did after the Christchurch earthquakes so, clearly, there have been lessons learnt and improvements made,” Stevens said.
The increasing cost of insurance, influenced partly by the 2023 weather events, has also emerged as a significant issue, particularly in the context of rising living costs.
Recent data from Treasury revealed that homes in flood-risk areas have been facing significant increases in premiums as insurance companies use more precise risk modelling to set their rates.
Stevens said that inquiries about insurance costs were among the top five issues reported this year, highlighting the financial pressures on households.
“This is unsurprising, given the ongoing financial pressure on households. We have a limited ability to look at complaints about pricing of insurance, and increases in premiums but, if people are struggling, we recommend they talk to their insurer about their options, or shop around for quotes from other insurers. Sometimes, choosing a higher excess can reduce premiums,” she said.
Complaints related to the scope of coverage were the most frequent type investigated by the IFSO Scheme, often due to misunderstandings about what policies actually cover.
Stevens said that many consumers do not realise that standard house insurance typically covers sudden damage, but not gradual damage.
“For example, most house insurance only covers sudden damage, not gradual damage. If a house already had issues before a weather event, it’s unlikely that insurance will cover the cost of fixing those pre-existing problems,” she said.
She stressed the importance of obtaining independent expert assessments, such as builder or engineer reports, in disputes over coverage.
General insurance – including policies for house, contents, vehicle, and travel – made up 68% of the complaints investigated by the IFSO Scheme.
Complaints about health, life, and disability insurance constituted 21% of the total, while 11% pertained to other financial services such as loans, credit, or financial advice.
House insurance was the most frequently complained-about area, accounting for 24% of all complaints, followed by travel insurance at 18% and motor vehicle insurance at 17%.
The Financial Services Complaints Limited (FSCL), New Zealand’s Financial Ombudsman Service, also reported a record increase in complaints and disputes in the past year.
It revealed that financial services complaints increased by 6% to 1,426, reflecting the broader economic challenges in the country.
“We expect this high level of complaints to persist as long as economic conditions remain difficult,” said FSCL Financial Ombudsman Susan Taylor.
