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Still room for improvement after life complaints drop: AFCA  

The Australian Financial Complaints Authority (AFCA) is encouraged by the decline in life insurance disputes, which fell 24% to 1898 in the last financial year and accounted for 2% of overall cases lodged with the ombudsman. 

However long-running issues such as premium changes and claim delays continue to dog the industry, according to AFCA. 

“Less complaints are a good thing. Obviously, we’re happy about that number going down. I don’t want everybody to be spending too much time patting themselves on the back though,” Senior Ombudsman Life Insurance Andrew Weinmann said. 

AFCA says the drop in life disputes can probably be explained by the reduction in complaints about funeral insurer Youpla Group and its ACBF companies. 

“Probably a significant part of that 24% decrease in numbers of complaints coming down [is due] to that spike in the year before not being there in this financial year,” Mr Weinmann said on Friday at the AFCA Member Forum’s life session. 

“But nevertheless, I don't want to downplay too much a drop in complaint numbers…and congratulations to you for the part you've played in that.” 

AFCA said the year-on-year reduction for life insurance complaints is about 7% when the decrease in Youpla disputes is taken into account. 

Income protection (IP) topped the list of complaints by product type with 523 disputes, followed by funeral plans (441), term life (347), total and permanent disability (210) and trauma (93). 

The IP numbers are down from 650 in the prior year and funeral plans disputes also dropped, by 50% from 880. 

Misleading product/service information caused the most complaints by issue (358), followed by delay in claim handling (245), incorrect premiums (209), denial of claim (145) and service quality (141). 

Mr Weinmann says the life products that are causing disputes “shouldn’t really be a surprise”. 

“Income protection is number one, it is usually number one,” he said. 

“It’s a relatively complicated product with a lot of things that disputes can come up about. It’s intended to provide a short-term benefit, which means that if there’s problems in the early stages of a claim, people are more likely to bring a complaint early on in the process. 

“But also importantly, as most of you know, there have been premium re-rates especially in income protection over the last couple of years. And as always, when there are premium re-rates, there are complaints about premium re-rates to AFCA.” 

There is a link between premium re-rates and complaints sparked by misleading product/service information. 

“When people come to us and complain about a premium re-rate, they’ll often say they were misled about how premiums worked on their policy, but it can also refer to stepped premium complaints and complaints where people say they didn't understand the rate at which their stepped premiums would increase,” Mr Weinmann said.