Annual Review 2022–23
Contents
- About this Annual Review
- Year at a glance
- Acknowledgement of country
- Board Chair message
- Chief Executive Officer and Chief Ombudsman message
- Organisational overview
- AFCA Independent Review
- Complaints
- Who complained to AFCA?
- Overview of complaints
- Open cases
- Closed cases
- Banking and finance complaints
- Buy now pay later
- Scam complaints
- Financial difficulty complaints
- Small business complaints
- General insurance complaints
- Significant events
- Life insurance complaints
- Superannuation complaints
- Investments and advice complaints
- Cryptocurrency
- Complaints lodged by Aboriginal and Torres Strait Islander peoples
- Complaints lodged by consumer advocates and financial counsellors
- Complaints lodged by paid representatives
- Complaints outside AFCA’s Rules
- AFCA’s Systemic Issues function
- AFCA’s Code compliance and monitoring functiong
- Engagement, awareness and accessibility
- Corporate information
- AFCA General Purpose Financial Report
- Glossary
Between 1 July 2022 and 30 June 2023
General insurance complaints received
Percentage of general insurance complaints resolved at Registration and Referral stage
Top five general insurance complaints received by product
|
Product |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Home building |
1,887 |
3,616 |
3,527 |
6,120 |
9,592 |
|
Motor vehicle – comprehensive |
2,680 |
4,104 |
4,386 |
5,791 |
8,296 |
|
Consumer credit insurance |
96 |
723 |
506 |
951 |
1,951 |
|
Travel |
1,029 |
3,168 |
2,477 |
532 |
1,679 |
|
Home contents |
478 |
946 |
1,079 |
1,289 |
1,565 |
Top five general insurance complaints received by issue
|
Issue |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Delay in claim handling |
2,023 |
3,521 |
3,126 |
4,804 |
7,953 |
|
Claim amount |
1,989 |
3,171 |
3,161 |
3,747 |
5,720 |
|
Denial of claim – exclusion /condition |
1,667 |
3,032 |
3,146 |
3,111 |
4,733 |
|
Denial of claim |
1,366 |
2,337 |
2,479 |
2,125 |
3,048 |
|
Service quality |
666 |
1,353 |
1,164 |
1,503 |
1,869 |
General insurance complaints closed
Average time to close a general insurance complaint in days ²
Stage at which general insurance complaints closed
|
Stage |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
At Registration |
4,363 |
8,389 |
8,367 |
7,606 |
11,565 |
|
At Case Management |
1,381 |
3,745 |
4,330 |
3,984 |
7,297 |
|
At Rules Review |
771 |
1,440 |
1,350 |
1,700 |
1,708 |
|
Preliminary Assessment |
570 |
2,046 |
1,669 |
1,707 |
2,456 |
|
Decision |
319 |
1,944 |
2,125 |
2,247 |
2,544 |
Time taken to close general insurance complaints
|
Time |
2018–19 ¹ |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
|---|---|---|---|---|---|
|
Closed in 0–30 days |
2,217 |
4,002 |
3,684 |
4,089 |
4,982 |
|
Closed in 31–60 days |
3,045 |
6,162 |
5,324 |
5,529 |
8,403 |
|
Closed in 61–180 days |
2,076 |
5,793 |
6,863 |
5,742 |
9,072 |
|
Closed in 181–365 days |
66 |
1,525 |
1,786 |
1,556 |
2,726 |
|
Closed in more than 365 days |
0 |
82 |
184 |
328 |
387 |
¹ AFCA commenced on 1 November 2018. The 2018–19 financial year covers an 8-month period (from 1 Nov 2018 to 30 Jun 2019). Year-on-year changes between 2018–19 and 2019–20 have been calculated pro rata using monthly averages.
² This excludes complaints that were inactive for an extended period, for example complaints that were paused because the financial firm was insolvent or due to court proceedings, and complaints that were previously closed and re-opened.
The general insurance products that AFCA can consider complaints about include:
- small business policies (including business interruption, but excluding professional indemnity or legal liability)
- consumer credit insurance
- home building
- home contents
- motor vehicle
- personal and domestic property (including pleasure crafts)
- residential strata title
- sickness and accident
- travel insurance.
The types of issues and problems AFCA resolves include:
- decisions a financial firm has made, such as denial of an insurance claim
- delays or complaints about an insurer’s service
- complaints about rebuilding and repairs to houses and motor vehicles
- incorrect application of, or misrepresentation about, insurance premiums
- misleading or incorrect information about an insurance product or service
- not following a complainant’s instructions
- privacy and confidentiality breaches.
Key insights
- Complaint numbers over the past five years have been getting progressively larger, indicating the growing importance of our role in resolving insurance disputes.
- Interestingly, these heightened complaint volumes weren’t primarily tied to claims from major events, but stemmed from ‘business as usual’ insurance claims.
This year, AFCA received 27,924 general insurance complaints, which is a 50% increase on last year. We closed 25,570 complaints in total, an increase on last year’s 17,244 cases. In 2022–23, 45%, or 11,565 complaints, were closed at the Registration and Referral stage. On average, we took 85 days to close a complaint.
The highest number of general insurance complaints by product were home building insurance at 9,592, or 34%, comprehensive motor vehicle insurance with 8,296 complaints, or 30% of the total, and consumer credit insurance at 7%, or 1,951. Travel insurance complaints were slightly lower at 6%, or 1,679 complaints. Home contents insurance complaints made up 6%, or 1,565 complaints.
The top three issues complained about were claim handling delays (7,953 or 28%) – this was a 66% increase over 2021–22. Next were claim amount complaints (5,720 or 20%) – a 53% increase over last year. Denials of claims due to exclusions or conditions made up 17%, or 4,733 of the total complaints for the year.
AFCA closed a total of 25,570 general insurance complaints. At the Registration and Referral stage 11,565 (45%) were closed. This stage has averaged 8,627 complaints over the past five years. We closed 7,297 (29%) complaints at the Case Management stage or 29%. This was an 83% increase over last year. The Rules Review stage closed 1,708 (7%) complaints. The Preliminary Assessment stage closed 2,456 (10%) complaints and the final Decision stage closed 2,544 (10%) complaints.
Significant increase in insurance complaints and declining insurer performance
This year, we saw a marked increase in general insurance complaints. There was a notable increase in complaints about insurers’ services, along with a general increase in other areas such as claim denials. Interestingly, these high complaint volumes weren’t primarily linked to claims from severe weather events and natural disasters like floods, but they stemmed from ‘business as usual’ claims. This is likely due to a range of issues including the industry shifting resources to handle the surge of claims from significant weather events, leading to further delays. Issues with supply chains affected by international events also led to delay in claims handling. These delays resulted in increased complaints about insurers’ services, primarily driven by ineffective communication with policy holders.
In 2022–23, we also saw a notable decline in performance by industry to address and resolve complaints before they reached AFCA, or in the early stages of the AFCA process. Insurers were also less responsive in their interactions with AFCA, as reflected in the rise of overdue responses, extension requests and non-responses to AFCA.
We acknowledge there has been a range of environmental factors that have created challenges for the sector. However, we have seen a sustained level of complaints that have continued now for more than 12 months, and which do not look to be slowing. Reference is often made to natural disasters as one-off events. However, the reality of climate change means these events will likely become more common. Being able to juggle 'business as usual’ claims with natural disasters must be part of the way we all work.
Working with insurers
AFCA has worked closely with the insurance sector over the past year to encourage earlier complaint resolution and better response rates. We regularly provide feedback to insurers, including our concerns about where we think performance can be improved. We also regularly share complaints data to help the industry improve its practices and performance.
We share what we hear from consumers, such as their frustration at not being able to easily contact their insurer, and dealing with uncertainty about wait times, claim progress and outcomes. While some delays are inevitable when there is pressure on scarce supplies and labour, maintaining consistent and informative communication with customers helps the customer recover earlier from often traumatic events. It also reduces the risk of complaints and helps with earlier resolution of complaints when they do occur.
In May 2023, we co-chaired an industry roundtable with the Insurance Council of Australia to raise our concerns about the rise in general insurance complaints, and to work with the insurance sector to find constructive and long-term solutions to help minimise disputes and create a better customer experience in IDR and EDR practice. This roundtable was attended by executive members of the large insurers, as well as representatives from regulators ASIC and APRA.
AFCA will continue this work in 2023–24. Together, we are confident we can find sustainable solutions to reduce the number of general insurance complaints lodged at AFCA, which will benefit both consumers and general insurers.
Case study – Flexi Hoses
Background
The complainant lodged a home and contents insurance claim after a flexi hose under their bathroom sink burst. The insurer declined the claim saying the damage was caused by rust, corrosion, wear, tear and gradual deterioration, which had weakened the hose causing it to burst. Claims for damage caused by wear, tear and gradual deterioration were not covered under the policy.
Findings and outcome
The panel accepted there was rust or corrosion on the flexi hose. However, the insurer’s expert evidence fell short of establishing that the rust or corrosion was the dominant reason for the hose bursting. The presence of rust or corrosion alone was not enough for the insurer to rely on the exclusion. Other alternate causes of the leak were just as plausible. The insurer had not demonstrated that the policy exclusion applied, and the insurer was required to accept the claim.
AFCA relies on expert panels to consider particularly complex complaints. The panel is made up of an AFCA ombudsman, and both a consumer and industry representative. Panel members are selected by our Board based on their objectivity, qualifications, experience and relevant personal qualities.
The outcome in this case demonstrates that when seeking to rely on expert evidence, insurers need to ensure the evidence includes the reasoning for reaching a particular conclusion. It should clearly demonstrate the causal link the insurer seeks to rely on. In this complaint, the panel was not persuaded by the brief report from the insurer’s expert that it was reasonable to accept the proximate cause of the hose bursting was rust or corrosion.
Business interruption insurance test cases
AFCA released its inaugural decisions on business interruption insurance complaints, which we had paused while we awaited the outcome of test cases to clarify policy wordings related to the COVID-19 pandemic.
The test cases involved insurers and businesses affected by COVID lockdowns including:
- an initial test case in the NSW Supreme Court
- a separate test case in the Federal Court
- an appeal of the full Federal Court
- an application to the High Court for special leave to appeal.
After the High Court declined to give special leave to appeal in October 2022, AFCA was able to finalise resolution of the cases we had placed on hold, except for those complaints related to class actions in the Federal Court.
Each AFCA decision was based on the specific details and context of the complaint, and took into account the decisions of the Courts in the test cases.
By 30 June 2023, AFCA had received 401 COVID-related business interruption insurance complaints since the start of the pandemic in 2020.
As at 30 June 2023, AFCA has now issued 24 decisions and resolved 220 complaints. This represents over half the COVID-related business interruption insurance complaints lodged with us. If we can’t help the parties to reach agreement, the information relevant to the complaint is shared and the complaint is referred to an ombudsman to make a decision. Often these complaints are decided by a panel made up of an AFCA ombudsman, and both an industry and a consumer representative. About 117 of these complaints remain open. We have placed around 100 on hold until the class actions in the Federal Court that affect these complaints are finalised. We are keeping all parties informed about the status of these class actions.
