Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
What to do if you're not happy with your claim
Where to find help
You might be surprised to know that insurance companies typically pay out on the overwhelming majority of claims made in Australia and New Zealand. However, if you are one of the very small percentage who has an insurance claim rejected each year, or if you are unhappy with the amount your insurer has deemed payable for a claim, it’s important that you know that there is a process in place through which you can make a complaint and seek an alternative resolution.
Here is everything you need to know about that process.
The law and the General Insurance Code of Practice
We recently discussed the various laws governing insurance in Australia (insert article here), as well as the Code of Practice by which all members of the Insurance Council of Australia must abide.
The laws and the Code are especially relevant where disputes and resolutions are concerned, as they lay out some steps and parameters of conduct. The Code is important here because it specifies that insurers must be fair and transparent with their customers — and this is especially pertinent where claims and complaints are concerned.
Meanwhile, the laws surrounding insurance in Australia make it compulsory for insurers to provide customers with an avenue to first make a complaint directly with the insurer (internal dispute resolution) and, then, if customers deem the outcome of the complaints process unsatisfactory, insurers are required to direct customers to an alternative outside avenue (external dispute resolution).
This may sound a bit convoluted, but it’s actually very straightforward when you break the two avenues down, which, as luck would have it, we are about to do.
Internal dispute resolution
There are many reasons why an insurance company may legitimately deny a claim — your failure to disclose information relevant to the insurance policy, what you are claiming for falls within the exclusions category, your failure to meet your responsibilities as part of the insurance contract, your failure to pay the premium, etc. It’s really in your best interests to consider carefully the reasons why an insurer has come to their decision and do a little bit of research about whether or not their actions are justified before you make a complaint.
However, there are times where you may feel that an insurer’s decision on your claim is incorrect and you have grounds to challenge their decision. Your complaint might not actually relate to a claim, rather you may feel that the insurer did not adequately disclose information to you, or perhaps you have taken issue with how you have been treated by the staff at an insurance company or someone affiliated with the insurer.
In any of these cases, your first port of call is to make a complaint directly with the insurer as part of their internal dispute resolution process, which insurers are required to inform you about — the PDS is where you will typically find such information.
When you make a complaint through an insurance company’s internal dispute resolution process, the insurer will appoint someone within the company to review your complaint and come to a decision about the complaint. This person has 15 days from the time of you lodging your complaint to notify you, in writing, of the insurer’s decision about the complaint.
In most cases, you will be able to reach some sort of agreement with your insurer through their internal dispute resolution process. However, if you are unhappy with the outcome of your complaint, then you have the option of progressing it further.
External dispute resolution
If you find the insurer’s decision relating to your complaint to be unsatisfactory, then they are required to advise you of your options for external dispute resolution. In Australia, this will involve the Financial Ombudsman Service (FOS) — an independent and impartial body that helps to resolve disputes between customers and insurers, among other service providers.
One of the great things about taking a dispute to the FOS is that there is no charge for having them act as a mediator between you and your insurer. When you make a complaint to the FOS, they will notify your insurer and give them 45 days to resolve the issue with you. If you’re still unhappy with the outcome, then the FOS will investigate your complaint, attempt to negotiate a resolution between both parties and make a decision that is then legally binding on the insurer — meaning they have to do what the FOS says.
What if I don’t like the decision the FOS comes to?
While the FOS’s decision may be legally binding on insurers, it has no legal implications for the complainant. As such, if you aren’t happy with the resolution the FOS has recommended, there is the option to progress your complaint to the courts. However, while the internal and external dispute resolution schemes are free, taking court action is typically a costly venture, so it’s certainly important that you give some serious thought to the pros and cons of legal action.
Where can I find more information?
As we mentioned above, insurers will provide you with the process for internal dispute resolution in their PDSes. Most insurers will also include this information on their websites. For more information about external dispute resolution through the FOS, visit their website at www.fos.org.au.
In New Zealand, the law requires all financial service providers to be registered on the Financial Services Providers Register and to belong to an approved dispute resolution scheme. There are several schemes, including the Banking Ombudsman Scheme, and the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) which resolves complaints about insurance and financial services. Virtually all of the insurers which are members of the Insurance Council of New Zealand (ICNZ) and subject to the Fair Insurance Code belong to the IFSO Scheme. In addition, health, life and disability insurers are also Participants in the IFSO Scheme, but are not members of the ICNZ, or subject to the Fair Insurance Code. Like Australia’s FOS, the service is independent, impartial, and free for consumers.
Internal dispute resolution
The IFSO Scheme’s process requires you to make a complaint directly to the insurer as part of their internal dispute resolution process. The IFSO Scheme can help by providing guidance and the relevant forms for making written complaints.
External dispute resolution – IFSO Scheme
If, after going through your insurer’s complaints process, your complaint remains unresolved, this is called “deadlock”. The next step is to make a complaint to the IFSO Scheme if your insurer is a Participant and you can look at our website www.ifso.nz to find out this information.
When your complaint has been accepted for investigation by the IFSO Scheme, a case manager will make contact with you. The case manager will apply negotiation, mediation and conciliation skills when investigating complaints. The aim is to reach settlement where possible, which is an agreement between both parties. If settlement cannot be reached, a decision will be made based on the factual information provided by you and your insurer, and expert advice if required.
What if I don’t like the decision the IFSO Scheme comes to?
Both you and your insurer have the right to request a review of any IFSO Scheme decision, if there is relevant new information you want to be considered. If the IFSO makes a Recommendation, the initial decision may or may not change, and you may or may not get the outcome you want. If the outcome is in your favour and the insurer does not accept the IFSO’s Recommendation, the IFSO can make an Award against the Participant which is binding and enforceable in the courts.
However, if you remain unhappy with the IFSO’s recommendation, and you have not entered into any settlement agreement, you may take your complaint to any other alternative dispute resolution process or to Court. None of your legal rights are compromised by making a complaint to the IFSO Scheme and it costs you nothing to do so.
Where can I find more information?
For information on making a complaint to your insurer in New Zealand or to the IFSO Scheme, visit their website at www.ifso.nz.