Consumer advocacy groups have delivered a damning assessment of the insurance industry’s response to the flooding events across eastern Australia in 2022.
The behaviour of assessors and third-party contractors was described as “appalling” during the first public hearing of a federal parliamentary inquiry on Wednesday.
The House of Representatives Standing Committee on Economics is examining insurers’ responses to four major flood events in 2022, which affected Queensland, New South Wales, Victoria and Tasmania.
A submission from the Insurance Council of Australia estimated the total cost of claims lodged as a result of the four events was nearly $7.4 billion.
It said there were 303,407 insurance claims lodged, including more than 230,000 from the floods in south-east Queensland and the Northern Rivers region of NSW.
‘No excuse’
Financial Rights Legal Centre senior policy and communications officer Julia Davis today told the inquiry the volume of claims was “no excuse” for poor behaviour.
“We have just seen example after example of sometimes appalling behaviour, really rude, aggressive, bullying behaviour, where third parties come to a person’s house and either accuse them of letting their house fall into disrepair or accuse them of insurance fraud, basically.”
“It’s like they’re fishing around for an exclusion.”
Ms Davis said she appreciated that the magnitude of the claims was “so extreme that insurers had to onboard contractors that they hadn’t used in the past or wouldn’t normally use”.
“But really it’s no excuse,” she said.
“They are your agents. They are an extension of your business.”
The inquiry heard that delays in processing claims were a major issue.
“The reason delay is so horrible is because consumers are often left completely in the dark,” Ms Davis said.
“A lot of that could be alleviated if insurers were better at staying in touch, calling when they say they’re going to call.
“It’s when the insurer doesn’t make contact for months and doesn’t call back when they say they will that consumers start to go crazy.”
Ms Davis told the inquiry the centre’s insurance law service took about 1,200 storm and flood calls during 2022.
“People only call us when things go wrong,” she said.
“My views overall are very negative. That’s because every story I hear is appalling.”
She said the industry needed to better train its staff in how to deal with traumatised people.
“Let’s expect that most of your customers are dealing with trauma and you have promised them care,” Ms Davis said.
“So you need to deliver in an appropriate and compassionate way.”
A call for culture change
Consumer Action Law Centre managing lawyer Philippa Heir told the inquiry the culture of the insurance industry needed to change.
“We see a lot of claims declined on spurious grounds,” she said.
“It appears from our perspective that it comes from a culture where the first thought for the assessor is, ‘How can I decline this claim?’, not, ‘How can I pay this claim?’.”
Ms Heir told the inquiry many claims were rejected on the basis of expert reports commissioned by the insurer.
“The reports themselves that insurers seek to rely on often only contain vague assertions about the alleged lack of maintenance or wear and tear,” she said.
“They don’t set out what maintenance they think was required, and what difference that would have made.
“People impacted don’t know they can challenge an decision, or if they do they don’t know how to go about it.
“Many don’t have the means to obtain their own expert reports to challenge the insurer’s experts.”
The submission from a coalition of consumer groups made 34 recommendations, including calls for a standard format for expert reports, better oversight of third-party contractors, and subsidised insurance for people who cannot afford it.
The Insurance Council of Australia and major insurance groups are due to give evidence to the inquiry next week.
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