Latest Developments: General Insurance

By Sam Parrino
Ombudsman - General Insurance

 
Hello and welcome to the General Insurance section of the first Financial Ombudsman Service eNews. I am delighted to be part of this inaugural communication as I believe that eNews provides a valuable way for us to communicate with our stakeholders and other interested parties. Below you will find a brief overview of trends in insurance disputes and an update on recent insurance news.
 

Disputes in General Insurance

In the six months to 30 June 2008 the General Insurance division of the Financial Ombudsman Service, formerly the Insurance Ombudsman Service, received 1182 new referrals, compared to 970 for the previous year, up 22%. Indications are that this increase was in part due to weather-related claims as home building insurance disputes from Queensland and New South Wales rose 50% to 327 disputes in the period.

Motor insurance remained the largest category of disputes overall, with 372 for the six months to 30 June, 31.5% of the total number of general insurance disputes. The number of travel insurance disputes grew from 173 to 208, but remained static as a percentage of disputes overall at 17.6% for the period.

Outcomes in favour of insurers increased by 3% to 58.6% during this period, continuing the trend of recent years. A fall in the number of claims being upheld by the Ombudsman in favour of the consumer is a positive result as it indicates more disputed claims being satisfactorily settled by members at the Internal Dispute Resolution (IDR) stage, ie before a complaint is escalated to the ombudsman. However, with 27% of disputes being brought to the ombudsman still being resolved in favour of the consumer, there is clearly still scope for improvement at the IDR stage.
 

Other news

The General Insurance arm of the Financial Ombudsman Service is about much more than decision-making. In many respects our educational role is just as important. A decision simply resolves a dispute between two parties, but our educational program has benefits for all stakeholders, particularly industry and consumers. Some of our educational activities over the past three months have included:
 

• Open Forum programme sessions in Sydney, Brisbane, Perth and Adelaide and Hobart. These forums are always well attended by members of the industry and other stakeholders and provide an opportunity for direct discussion with decision-makers on a wide range of issues.

• A senior claims officer from a large insurance company coming to work in the Financial Ombudsman Service General Insurance division for an extended period, observing our decision-making process and attending panel meetings. We find that such involvement allows participating companies to understand what we are looking for in terms of submissions.

• Ongoing outreach in the media and at conferences and trade shows to educate consumers on key issues to consider in selecting general insurance products and services.

• Meeting with representatives of ASIC to discuss matters of mutual interest and concern, such as policy documentation, the concept of utmost good faith, disputes arising from natural disasters with particular reference to flood, and our procedures and processes generally

Climate change, flood and determinations

Climate change is well and truly on the agenda and the weather report is becoming much more important for the Financial Ombudsman Service. Climate change disputes arise primarily from storms, which are usually accompanied by wind and rain or hail and may result in flood erosion or subsidence. The issue for determination in such disputes relates to whether the damage was caused by the storm, or by a separate cause that gives rise to the operation of a policy exclusion. For example, if it is determined that the storm water has caused water inundation to the property the claim will be paid. If however it is considered that the flood water or a mixture of flood water and storm water enters the property initially, the claim will not be paid.

In order to accurately determine these disputes, the panel will visit the various locations and talk to the parties, the expert witnesses and inspect the location. Panel members recently undertook an inspection in the Cessnock region of New South Wales for this purpose. The panel is also in the process of arranging a visit to Gippsland to consider flood related claims caused by flooding in that region late in 2007. If you would like further information on flood or storm related insurance issues, please don’t hesitate to call our helpline on 1300 78 08 08.