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ASIC Black Summer claims review flags areas for improvement

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An Australian Securities and Investments Commission (ASIC) review of claims handling outcomes for consumers affected by the Black Summer bushfires has identified areas for improvement and good industry practices that it says should be widely adopted.

The study involved 8801 claims across 12 insurers, with reviewers collecting and monitoring bushfire-related claims handling data over a 15-month period.

ASIC says findings have been shared with insurers ahead of the upcoming disaster season, and with claims handling legislative reforms set to take effect from January.

‘With summer upon us, we want to remind all insurers they now must manage claims efficiently, honestly and fairly,” Deputy Chairman Karen Chester said today.

“To consumers, the real value of an insurance policy is tested when they need to claim. It is important that claims are resolved quickly, that the process is consumer-centric, that repairs and rebuilds are timely, and that consumers are supported as well as possible after a disaster.”

The review found some insurers need to improve the quality, accuracy and reliability of claims information recorded in their systems. Issues included some data missing where ASIC would expect it to be reported.

‘We call on insurers to invest in better systems, processes and internal controls,” Ms Chester said. “Products must not only be fit for purpose to meet consumers’ needs, but insurers also need to record accurate data to know how they are performing when handling claims.”

Some 21% of policies had debris removal as part of the sum insured, rather than as an additional benefit, raising concerns about underinsurance.

ASIC found 99% of claims determined by insurers were approved in-full or in-part, 88% of claimants accepted the insurer’s decision within four months of lodgment and as of September this year 93% of claims were closed, 5% withdrawn and 2% remained open.

Nearly all claimants were afforded a temporary accommodation benefit, typically for one year, with insurers reporting 5% of claimants had used up all of their benefit by the end of January.

Good practices identified included proactively contacting customers in affected areas and paying the maximum temporary accommodation benefit at the outside of claims assessed as a total loss, to provide certainty to claimants.

Insurers also made retrospective changes to broaden policy coverage for fire damage and have undertaken simulation exercises to stress test a response to simultaneous disasters in advance of the upcoming disaster season.

Insurance Council of Australia CEO Andrew Hall says while ASIC identified areas for improvement in relation to data, the outcomes overall revealed improved claims handling practices. He also noted the current disaster season is taking place in the shadow of COVID impacts on travel between regions.

“With restrictions still in place in some jurisdictions insurers are concerned that claims handling for customers will be delayed, which is why we have been calling for a nationally consistent approach to the movement of fully vaccinated insurance disaster responders across state borders,” he said.