ASIC has released Report 621 on ASIC’s review of how general insurers investigate comprehensive car insurance claims where fraud is suspected. ASIC found that insurers are investigating some claims in ways that are causing significant consumer harm, eroding trust in insurance and without fair process.
ASIC says fraud is a real and serious issue and insurers need to investigate, identify and deny fraudulent claims. But its data shows that of all the claims that insurers decided to investigate, only 4% were declined for fraud, and only 10% were declined for some other reason. Over 70% of the claims that insurers investigated were paid.
The insurers ASIC reviewed are Allianz Australia Insurance Limited (Allianz), Auto & General Services Pty Ltd (A&G), Insurance Australia Group Limited (IAG), AAI Limited (Suncorp), and Youi Pty Ltd (Youi).
ASIC concludes that:
- Insurers are not always treating consumers fairly when they investigate claims Insurers investigated some claims in ways that were inappropriate and harmful to consumers.
- Changes to the industry code are necessary. While some improvements to the General Insurance Code of Practice have been proposed, more improvements should be made to raise standards to ensure that claims investigation practices are appropriate and reflect a fair process.
- ASIC will take action against poor conduct. With significant civil penalties now available for breaches of the duty of utmost good faith, ASIC says it will take court action against insurers who break the law.
ASIC’s review also identified limitations in insurers’ ability to provide timely and accurate data on the claims that they flagged or investigated for suspected fraud. ASIC says insurers must ensure that they have adequate resources to collect and understand data on conduct risks and consumer outcomes for investigated claims.
