From a consumer perspective, claims handling is the most critical part of the insurance process, and one of the most problematic. Too often, the claims process is arduous, lengthy and unfair.
In our joint response with Financial Rights Legal Centre (Financial Rights) and CHOICE to The Treasury’s consultation on making insurance claims handling a financial service implementing recommendation 4.8 of the Banking, Superannuation & Financial Services Royal Commission, we strongly support these reforms, which will remove the exemption for handling and settlement of insurance claims, or potential insurance claims, from the definition of ‘financial service’ under the Corporations Act. This loophole has meant that insurance claims handlers were not obliged to act efficiently, honestly and fairly, comply with other disclosure or conduct obligations, or be subject to ASIC oversight.
Placing an obligation on insurers to ensure that the process is efficient, honest and fair will ensure that consumers can expect the same standard from insurers handling claims as they can expect from other financial service providers.
However, we make a number of recommendations to improve implementation, including:
- Regulating exploitative for-profit insurance claims management services acting on behalf of insurance consumers;
- the Statement of Claim Settlement Options should also apply to life insurers and not be confined to general insurers only; and
- the policy basis for an exemption to unauthorised foreign insurers be reconsidered for removal through the loopholes and exemptions review.