Fair and timely claims handling is essential to maintaining consumer trust and confidence in the general insurance industry, particularly when it comes to home insurance claims and the increasing frequency of severe weather events.
We previously examined insurers鈥� claims handling practices following the major floods of 2022 and found weaknesses across key areas. Our findings were consistent with other reviews, including the House of Representatives Standing Committee on Economics inquiry into insurers鈥� responses to the 2022 major floods.
Recently, we went back to assess how home insurers had addressed the areas of improvement identified in our Report 768 Navigating the storm: ob体育鈥檚 review of home insurance claims (REP 768), published in August 2023.
Our latest review has found that while insurers implemented programs to improve claims handling functions in recent years, and some progress has been made, there is still significant room for further improvement.
We identified that without further work, there is considerable risk of ongoing consumer harm, as well as breaches of Australian financial services (AFS) licensee obligations and the General Insurance Code of Practice (Code).
ob体育鈥檚 latest review
In August 2024, we began a review of the action plans of seven insurers, six that participated in our August 2023 report and an additional insurer. They included:
- AAI Limited (Suncorp) (including AAMI, APIA, GIO, Shannons, Suncorp and Vero)
- Allianz Australia Insurance Limited (including Allianz and TIO)
- Auto & General Insurance Company Ltd (including Budget Direct, ING and Virgin)
- The Hollard Insurance Company Pty Ltd and Hollard Insurance Partners Limited
- Insurance Australia Group, which includes Insurance Australia Limited and Insurance Manufacturers of Australia Pty Limited (including CGU, Coles, NRMA, CGIC, CGIO, WFI and RACV)
- QBE Insurance (Australia) Limited (including QBE, ANZ and Elders), and
- Youi Pty Ltd.
What we found
ob体育鈥檚 review revealed that general insurers made progress to address the areas for improvement identified in our August 2023 report, which focused on better consumer communications, project management, handling of complaints, identification and treatment of vulnerable customers, and resourcing for dealing with claims and complaints. However, we found there was inconsistent progress across the industry and still room for more work. We have outlined our high-level observations below.
1. Oversight of independent experts needs work
The House of Representatives Standing Committee on Economics found that:
鈥業t is essential that insurers have frameworks in place to ensure that the activities of third parties are conducted in accordance with insurers鈥� and policyholders鈥� expectations and in full compliance with all regulatory requirements.鈥�
Insurers should maintain adequate oversight of third parties they appoint so that customers understand and feel included in the claims process.
Insurers generally have well-documented quality assurance over their builders and repairers. This includes monitoring data on key performance indicators that, if met, would drive a positive claims experience for consumers, such as timeliness, quality of repair, customer sentiment and third-party service provider conduct.
Some insurers have also made steps to enhance their oversight of builders and repairers by strengthening and implementing new systems that oversee supply chain performance.
By comparison, we found that insurers鈥� oversight of independent experts (such as engineers or hydrologists) was not as developed.
Quality assurance for independent expert reports generally focused on the timeliness of reports, rather than their quality or accuracy. They also relied on claims handling staff to identify errors in reports.
Insurers generally did not review independent expert reports following claims decisions to confirm that the report arrived at the correct outcome. If insurers do not adequately monitor independent expert reports and provide feedback, they may not be certain of the quality and accuracy of expert reports.
We did observe that one insurer used a third party to arrange referrals to independent experts and ensure quality assurance of reports before sending them to the insurer. They also kept data on overturned claims and correlated this to expert reports. Any incorrect information was also recorded and incorporated into performance reviews.
2. Consumers deserve better information around cash settlement processes
To comply with their legal obligations, insurers need to treat customers fairly and honestly when offering to resolve an insurance claim through cash settlement. The Code also requires insurers to inform customers about how cash settlements work and how decisions are made.
The insurer must provide a cash settlement fact sheet, which must include a statement outlining the options for settlement that are legally available to the policyholder. This should include any alternative forms of settlement available for each component, such as replacement or repair.
Since insurers have greater knowledge of their products and policy terms, they should present these options to customers, rather than direct customers to complex Product Disclosure Statements for that information.
We found that many cash settlement fact sheets give customers minimal information on the right to have a cash settlement reviewed, and few clearly outline what the review process is or when the right of review expires.
As an example of better practice, one insurer provided additional information along with the cash settlement fact sheet, highlighting risks such as consumers having to manage their own repairs. Another insurer introduced post-claim care calls to confirm the cash settlement was adequate and the consumer was able to complete repairs as planned.
3. Increased resourcing is not necessarily keeping up with demand
To comply with their legal obligations, insurers need to maintain adequate resourcing of both their claims handling and dispute resolution functions. In our August 2023 report, we noted that insurers should be prepared for 鈥榯he new normal鈥� of frequent severe weather events and ensure their resourcing plans reflect this.
ob体育 has been monitoring levels of industry resourcing dedicated to claims handling and internal dispute resolution (IDR), noting that claims handling resourcing has increased since 2019.
Figure 1 explanation
Figure 1 shows claim volumes increased significantly in 2022, 2023 and 2024, but that claims staff only increased significantly in 2023 and 2024.
We note that IDR cases have increased significantly year on year since 2019, but staffing dedicated to IDR has not risen at the same rate. From October 2021, ob体育鈥檚 Regulatory Guide 271 Internal dispute resolution (RG 271) required insurers to record all complaints, regardless of their nature or the timeframe for resolution. We are aware that IDR cases may be handled by frontline staff who are not dedicated to IDR; however, this is not included in the calculations.
In 2024, ob体育 reviewed 11 general insurers to understand how they are supporting customers who make a complaint and complying with their regulatory obligations. In December 2024, we published Report 802 Cause for complaint: Complaints handling in general insurance (REP 802). This review found a number of failures, including that insurers are failing to identify one in six customer complaints. Deficient resourcing was identified as one of the causes contributing to the failures seen in this review.
Figure 2 explanation
Figure 2 shows internal dispute resolution cases increased significantly each year since 2019, but that the rise in staff dedicated to these cases did not keep up.
Although insurers have increased their external dispute resolution (EDR) resources, particularly in 2023 and 2024, these increases have not matched the substantial rise in EDR cases compared to 2019.
Figure 3 explanation
Figure 3 shows external dispute resolution cases increased significantly each year since 2019, but that the rise in staff dedicated to these cases did not keep up.
We compared claims and EDR resourcing across insurers in 2024. Figure 4 shows the number of claims and EDR cases per full-time equivalent (FTE) staff member at each insurer. Although this does not consider internal efficiencies that might have been achieved through improvements to process or by investments in technology, insurers with fewer claims and EDR cases per staff member are better placed to comply with their legal obligation to be adequately resourced.
Figure 4 explanation
Figure 4 shows the number of claims and external dispute resolution cases per full-time staff member at each insurer.
Note: The insurer labels in these graphs do not correlate to the list of insurers above. Participant insurers鈥� data is reflected in a randomised way across the graphs.
4. One point of contact to handle claims is improving customer communications
In our August 2023 report, we highlighted that poor customer communications were a source of friction in the claims process. Too often, policy exclusions and denials were poorly communicated, and customers were inadequately informed of the progress of building repairs. We also highlighted the need for insurers to have adequate systems and records to meet their obligations, including the timeframes for responding to customers set out in the Code.
Most insurers have now introduced a single point of contact to handle claims, which can prevent customers having to re-tell their story multiple times.
On the downside, we found that controls to monitor timelines set out in the Code were often manual. While insurers have workflows that alert staff to communicate to customers in line with Code obligations, they do not always have clear processes to monitor if communication has occurred.
5. Insurers are refining identification data
Tailoring claims handling appropriately to vulnerable consumers is an important feature of insurers鈥� obligation to handle claims fairly. Our August 2023 report found insurers often failed to correctly identify vulnerable customers and lacked adequate data to identify them. Too often, solutions were not tailored to a consumer鈥檚 vulnerability.
In our latest review, we found most insurers had invested in resources and skills for specialist teams handling vulnerable customers. Many had reviewed vulnerability indicators and introduced new controls. All insurers noted an increase in vulnerable consumers in their business-as-usual home and contents claims (i.e. claims not relating to natural disasters).
Figure 5 explanation
Figure 5 shows the percentage of claims involving vulnerable consumers at each insurer.
Note: The insurer labels in these graphs do not correlate to the list of insurers above. Participant insurers鈥� data is reflected in a randomised way across the graphs.
We also found procedures do not always consider vulnerability across the claim lifecycle. For example, cash settlement procedures did not always consider if a customer鈥檚 vulnerability may mean that a cash settlement is not the most appropriate outcome for that customer. For some insurers, procedures and controls did not extend to third parties representing the insurer.
6. Claims handling improvement programs remain inconsistent
We highlighted in our August 2023 report the need for improvement in claims handling.
Following our earlier report, all reviewed insurers have established programs to improve claims handling, with accountable owners for actions. However, program implementation is inconsistent.
One insurer was able to provide a comprehensive response plan that went beyond the original report recommendations and sought to improve the end-to-end customer experience, as tracked by a range of key performance indicators.
However, some insurers鈥� programs lacked clear objectives and metrics to measure success. Rather than monitoring their programs in fit-for-purpose risk management systems, there was a reliance on manual tracking, creating difficulty in monitoring and quantifying improvements.
The absence of clear metrics and tracking reduces the ability for a board to provide adequate oversight of claims improvement programs, which is critical for the sustainable implementation of claims improvement programs.
7. Audits focus more on specific claim files than broader quality assurance
To ensure that progress in improving claims handling is effective, insurers should have robust controls and quality assurance in place. This would also support insurers鈥� obligations to have appropriate systems and processes in place to monitor and report compliance under the Code.
While insurers are taking steps to improve quality assurance in their claims handling functions, they continue to report a large number of breaches of obligations under the Code. For example, the General Insurance Code Governance Committee reported 29,021 breaches of Code obligations by their subscribers in relation to home insurance in the period from 1 July 2023 to 30 June 2024.
We observed claim file audits across call centre and claims handling staff were often based on random sampling. These involved insurers assessing specific claim files against compliance with regulatory and Code obligations as well as their own key performance indicators.
Insurers who only rely on random sampling of files are missing an opportunity to do deep dive audits on thematic topics, such as independent expert reports, analysis of overturned claim decisions, targeted quality assurance over more complex claim files, and claims made by vulnerable consumers.
We are concerned that some insurers rely heavily on quality assurance to identify non-compliance with the Code rather than as a regular compliance function. Insurers should consider using technology solutions like automation to support compliance obligations.
Next steps for insurers
Insurers should assess their claims handling programs end-to-end against some of the better and poorer practices we have identified in our latest review and take steps to make meaningful improvements.
Despite the progress reported by insurers, their systems and processes have thankfully not been tested by an event of the same scale as the 2022 floods. Investing in improvements to the systems, processes and workforce that supports claims handling is essential for the industry to respond better to such events in the future.
Insurance claims handling remains an enforcement priority for ob体育 in 2025, and evidence of significant misconduct may result in enforcement action.
On 11 April 2025, we commenced proceedings against Hollard Insurance Partners Limited (formerly known as Commonwealth Insurance Limited) for allegedly breaching its duty of utmost good faith in its handling of a home building and contents insurance claim made in 2021, which took nearly three and a half years to resolve. This issue related to conduct that occurred prior to our follow-up review. ob体育 continues to investigate other matters involving claims arising from the 2022 floods.