Question on the Correct Complaint Procedure for General Insurance and Policy Excess

In response to my article posted on this blog on 26 February 2012 regarding a comment made by the Financial Services Ombudsmen (http://www.allanmanning.com/?p=630), I received the following question:
We are trying to put a complaint in about our General Business insurance which is the best way of getting this done. Our complaint is about work never completed after storm damage but the company requires us to pay. CGU are trying to railroad us for the excess amount.
 
Vicki [surname and email provided”
I replied as follows:
Hi Vicki,
 
The process is that if you are not getting satisfaction for the claim is to ask the claims officer to escalate the matter to the internal disputes area and then if you are still not satisfied you can go to the Financial Ombudsmen Service.
 
You must however in the first instance seek the internal disputes area to answer your specific question.
 
When it comes to a policy excess, I do not have your wording in front of me, but as a general rule the policy states that you as the Insured are to pay the first amount of any loss. This means the Insurer is within their rights to seek payment of the policy excess before they instruct a builder to complete the repairs.
 
From my experience, CGU are a very reputable insurer and I am sure that having paid any excess the repairs should be authorised.
 
I hope this helps.
 
Regards
Allan”

I would add the following for readers of the blog in respect of disputes. It is an extract of a chapter entitled “Your Rights and Remedies from my book: “It May Happen to Me! – A Guide To General Insurance” [http://www.lmigroup.com/content.aspx?artId=491], which covers this area in more detail. It is in both your and the insurers interests to have any dispute resolved as quickly and amicably as possible. A dispute can be over a number of issues ranging from price increases, refusal to renew and claims disputes.

With claim disputes the first point to realise is that insurance is a contract in which the insurer agrees to indemnify you for losses covered in the policy. I know of no policy in existence that is going to cover every single thing that can go wrong in life. It is of paramount importance for every Insured to understand what you are insured for and equally important to know what you are not covered for.  It is for this reason that I recommend that everyone use the services of a competent insurance adviser.

It may sound harsh, but Insurance is not and cannot be considered a charity. After a claim, the insurer will only pay what you are entitled. It is too late now to realise that for a small extra premium you could have had the correct sum insured or more appropriate cover. Having had a claim and believing you have not received your entitlement, you do have rights open to you. Remember that your insurance adviser will assist you through the process, but this is of course conditional on their agreeing that you do in fact have a valid claim. A Claims Preparer will also provide assistance with a disputed claim if one has been appointed.

Disputes also arise with insurance advisers and the same approach should be taken with them as you would with an insurer. The first step is to contact your financial service provider (the insurer or insurance adviser). You are encouraged to contact your insurer (or insurance adviser’s complaints area) first to discuss the issue and see if it can be resolved quickly. If this fails you are entitled to take the matter to a lawyer; for many claims you can use a far less expensive option. As the process is different in both Australia and New Zealand, I split the remainder of the blog entry in two to cover the position in both countries.  If this does not work, or you are not entitled to use the service, please review the Section at the end of the Blog titled “Going Legal” for some sound advice. Before I go on, I would repeat the advice that, in any dispute, the first step is always to speak with your insurer or insurance adviser.

Australia

Insurance Code of Practice

On 1 May 2010, the general insurance industry launched a revised version of the General Insurance Code of Practice. This Code covers all general insurance products except: workers compensation; marine insurance; medical indemnity insurance; and compulsory third party insurance including where there is linked driver protection cover. It does not cover reinsurance. Nor does it apply to life insurance or registered health insurance. This is a voluntary code and it is prudent for you to always check that the insurer you select has agreed to be bound by the code. You can check which insurers are signatories of this code by visiting http://www.codeofpractice.com.au/Default.aspx?tabid=56. This code has been updated again since the Brisbane Floods of 2011 and I am sure will continue to be refined as the insurance industry look for ways to improve their service. The cynics among you may suggest that this is due to public and political pressure. I do not share this view entirely.

Retail Client Defined

Before I start, I should explain that the process is different for retail products and clients for non-retail or wholesale products. With a general insurance product, under the Corporations Act 2001, a retail product is one where the product or service is provided to the person as a retail client if:

(a) either:

(i) the person is an individual; or

(ii) the insurance product is or would be for use in connection with a small business; (under the terms of the Act this means a business employing less than:(a) 100 people if the business is or includes the manufacture of goods; or (b) otherwise -20 people.)

(b) the general insurance product is:

(i) a motor vehicle insurance product; or

(ii) a home building insurance product; or

(iii) a home contents insurance product; or

(iv) a sickness and accident insurance product; or

(v) a consumer credit insurance product; or

(vi) a travel insurance product; or

(vii) a personal and domestic property insurance product (as defined in the regulations).

Seeking a Remedy

A set of sample complaint letters are available on the consumer website of the Australian Securities and Investments Commission (“ASIC”). There are sample letters for complaints about insurance but also financial advice and savings accounts.

Before the Financial Services Ombudsmen can consider any dispute, the financial services provider must have been given an opportunity to resolve the dispute with you directly. In most cases, the insurer has up to 45 days to respond to your complaint.

Lodge a Complaint with FOS

If this fails to bring you satisfaction, you are entitled to lodge a dispute with the Financial Services Ombudsmen (“FOS”). FOS is approved to operate as an external dispute resolution (“EDR”) scheme under ASIC’s Regulatory Guide 139 (RG 139).

FOS may only consider a dispute if the dispute is between a Financial Services Provider and:

(a) an individual or individuals (including those acting as a trustee, legal personal representative or otherwise);

(b) a partnership comprising of individuals – if the partnership carries on a business, the business must be a Small Business;

(c) the corporate trustee of a self-managed superannuation fund or a family trust – if the trust carries on a business, the business must be a Small Business;

(d) a Small Business (whether a sole trader or constituted as a company, partnership, trust or otherwise);

(e) a club or incorporated association – if the club or incorporated association carries on a business, the business must be a Small Business;

(f) a body corporate of a strata title or company title building which is wholly occupied for residential or Small Business purposes; or

(g) the policy holder of a group life or group general insurance policy, where the dispute relates to the payment of benefits under that policy.[1]

You can lodge your appeal online at https://forms.fos.org.au/OnlineDispute.

The FOS Review of the Dispute Begins

The first thing FOS will consider is whether the dispute falls within our jurisdiction. There are certain types of issues that fall outside their jurisdiction. As at the date of writing, this was set out in the Financial Services Ombudsmen’s Terms of Reference 1 January 2010 (as amended 1 July 2010). The types of general insurance disputes that cannot be considered by FOS, include disputes in relation to:

(a) non-disclosure, misrepresentation or fraud; or

(b) the rating factors and weightings that the insurer applies to determine the Insured’s or proposed Insured’s base premium, which is commercially sensitive information.

FOS may refuse to consider, or continue to consider, a dispute, if FOS considers this course of action appropriate, for example, because:

(a) there is a more appropriate place to deal with the dispute, such as a court, tribunal or another dispute resolution scheme or the Privacy Commissioner;

(b) the Applicant is not a retail client as defined in the Corporations Act 2001;

(c) the dispute relates to a Financial Services Provider’s practice or policy and does not involve any allegation of either Maladministration or inappropriate application of the practice or policy

(d) the dispute being made is frivolous or vexatious or lacking in substance; or

(e) after the dispute is lodged with FOS, the Applicant commences legal proceedings against the insurer that are related to the dispute.

If you are not entitled to have FOS adjudicate on your dispute, they will advise you. If this occurs, you should seek legal advice on the merits of your case and determine if you should take the matter before the courts.

How Your Dispute will be Handled by FOS

If you meet the criteria, FOS will work with you and the financial services provider to try and resolve your dispute. FOS will act independently by not taking sides. Their aim is to get a fair outcome for both parties to a dispute. FOS communicates with both parties by phone, email and letters.

How Your Dispute will be Resolved by FOS

FOS dispute resolution methods may involve negotiation, conciliation, or reaching a decision. It is important that all information relating to your dispute is provided to assist in a timely resolution. Remember that insurance is based on utmost good faith and whether you end up going to trial, or is it before FOS, you should always tell the truth and provide all relevant information and or documentation.

There are a number of potential outcomes for a dispute that could result from our process. These are:

  • the dispute is resolved by agreement;
  • a decision on the merits is made; or
  • FOS decides that they cannot or should not deal with the dispute because it is outside their terms of
    reference.

A dispute may also be withdrawn or closed because the Applicant (Insured) repeatedly fails to provide information/documentation requested by them. If a dispute is not resolved by agreement between the parties, then it will be resolved by a decision about the merits of the dispute. The decision will take into account all the information provided by the parties. All decisions will be based on what is fair in all the circumstances, taking into account the law, any applicable industry codes of practice, as well as good industry practice. There are two levels of decisions:

  • Recommendations; and
  • Determinations.

What is an FOS Recommendation?

A “Recommendation” is a decision on the merits of a dispute. It is made by one of our case workers who are authorised by the Chief Ombudsman to make Recommendations. This may be the case worker who handled the dispute in case management. The Recommendation will be in writing and will set out the case worker’s views on the merits of the dispute. A Recommendation will provide an outcome to the dispute. If the dispute is decided in favour of the Applicant
it will identify the action and/or the amount of any monetary compensation the

Financial Service Provider must provide to the Applicant, or the method for calculating that compensation. It may also outline any action the Applicant is required to take.

Will the Dispute always go to a Recommendation if it cannot be resolved by Agreement?

Normally, a dispute will be dealt with by Recommendation. However, in some circumstances, a dispute will be referred straight to Determination, without going to Recommendation first. This is called an “Expedited Determination”. When considering whether to expedite a dispute directly to Determination, we take into account the circumstances of the dispute, including:

  • any urgency (for example, if
    the Applicant is experiencing ill health);
  • the type of product or service;
  • the size of the loss involved;
  • the age of the matter; and
  • technical complexity.

If there is any urgency, or if the Financial Services Provider has gone into administration or liquidation, has ceased to trade, or has not responded to the dispute, then we will probably proceed to an expedited determination.

An FOS Recommendation is not Necessarily Binding

A Recommendation is only binding if both parties accept it within 30 days of receiving the Recommendation (or within any additional time allowed by FOS).

If the Parties Accept the Recommendation

If both parties accept the Recommendation, the dispute will be resolved on the basis outlined in the Recommendation. FOS will ask the Applicant to sign a “Confirmation of Settlement” to accept the Recommendation in full and final settlement of the dispute. The Financial Service Provider will then be bound by the outcome. The Financial Service Provider can ask the Applicant to sign a Deed of Release in addition to the Confirmation of Settlement, but only if it provides us with a copy of the Deed within 14 days of being told the Applicant has accepted the decision. The Deed must be consistent with the Recommendation.

Where the Recommendation is Not Accepted

If either party does not accept the Recommendation, then it is not binding. Either party can ask for a Determination, provided they do this within 30 days of receiving the Recommendation. If the Financial Services Provider does not accept the Recommendation, then the dispute will automatically proceed to a Determination. FOS can extend the 30 day time limit for either party to accept a Recommendation or to ask for a Determination.

FOS Determination

A Determination is a final decision on the merits of a dispute, made by:

  • the Ombudsman; or
  • a Panel of three decision-makers chaired by the Ombudsman.

A Determination is a final decision on the merits of a dispute. There is no further “appeal” or review process within the Financial Ombudsman Service. An Applicant has the right to accept or reject the Determination within 30 days of receiving it (or within any additional time we have allowed).
If the Applicant accepts the Determination, then it is binding on both parties.

If the Applicant does not accept the Determination, it is not binding on the Financial Services Provider and the Applicant may take any other available action against the Financial Services Provide, including action in the courts. Importantly a Financial Services Provide cannot accept or reject a Determination.

Learn more about FOS

This has just been a precise of the process. To learn more about this organisation or to lodge a complaint, please visit http://www.fos.org.au.

Insurance Code of Practice on Catastrophe Response

Turning back to the Code of Practice for a minute, the code includes a section covering catastrophes and disasters resulting in a large number of claims. The code states that:

  1. Insurers will respond to catastrophes and disasters in a fast, professional and practical way and in a compassionate manner.
  2. Due to the large number of claims, Insurers advise that they may not be able to meet all standards of this Code following a catastrophe or disaster. This is only understandable.
  3. Insurers will establish their own internal processes for responding to catastrophes and disasters.
  4. If you have a property claim resulting from a catastrophe or disaster and the insurer has finalised your claim within one month of the catastrophe or disaster, you can request a review of your claim if you think the assessment of your loss was not complete or accurate, even though you may have signed a release. Under the Code, you have six months from the finalisation of your claim to ask for a review of your claim.  Insurers should inform you of:

(a) this entitlement when we finalise your claim; and

(b) their complaints handling procedures.

  1. Insurers will co-operate and work with the Insurance Council of Australia in its role of industry coordination and communications under the Insurance Council of Australia’s catastrophe coordination arrangements.

Please note that signatories of the Code of Practice have recently agreed to provide the same level of service to claimants following a catastrophe as they do during non-catastrophe times. In all honesty, I am not sure how this is possible when you have multiple large catastrophes as we had during 2011. There are simply not enough trained loss adjusters or claims officers available to draw on and bringing in international adjusters has not proved altogether successful.

To learn more on this section of the code, please visit: http://www.codeofpractice.com.au/LinkClick.aspx?fileticket=-XTcClWRFGo%3d&tabid=37

New Zealand

The following section addresses the remedies available in New Zealand.

Insurance & Savings Ombudsman Service

Members of the Insurance Council of New Zealand participate in the Insurance and Savings Ombudsman scheme. The Insurance and Savings Ombudsman is an independent authority. It considers complaints regarding all types of personal and domestic insurances, and savings services, provided that the amount claimed does not exceed NZ$100,000. The scheme is free of charge for insured people, and the Ombudsman’s decision is binding upon the insurance company involved in the dispute.

Investigation Process

The process used by the Insurance and Savings Ombudsman for investigating a complaint is as follows:

  1. Insurance & Savings Ombudsman receives a complaint.
  2. The details of the complaint are sent to the insurance company involved. The insurance company is also sent a document signed by the complainant and any other relevant person(s) stating that:

(a) They are happy for the company to provide the Ombudsman with information; and

(b) They accept certain conditions relating to the non-provision of information in court proceedings.

  1. The insurance company must then provide any information it has in relation to the complaint and comment on any relevant issues.
  2. After having received and considered the necessary information, the Ombudsman will try to resolve the complaint by agreement between the parties.
  3. If this is not possible the Ombudsman may, at the request of either party, make a written recommendation as to how the complaint should be resolved. Each party is then given one month to make further comments.
  4. If the Ombudsman recommends the insurance company should make a payment to the complainant, the complainant may only accept the payment if they agree not to take any further action on the matter without the insurance company’s consent.
  5. If the complainant agrees to the Ombudsman’s recommendation within one month, the Ombudsman may make an award of money against the insurance company. The Ombudsman is able to make binding decisions on member companies up to NZ$100,000.

Complaints that cannot be Investigated by the Insurance & Savings Ombudsman

The Insurance and Savings Ombudsman may not consider complaints:

  • where an amount greater than NZ$100,000 is under dispute (unless the insurance company agrees);
  • that would be better dealt with by a court or other body;
  • that the complainant has not taken up with the company concerned;
  • that have been previously considered (unless new evidence is available);
  • that have been considered by a court or any other body;
  • that are pursued in a trivial,  frivolous or vexatious manner or in bad faith;
  • that relate to an insurance company’s commercial judgement, and methods or procedures for determining prices or premiums payable; or
  • that relate to an insurance company’s decision to impose conditions or limitations on a policy, or
    terminate or refuse cover under an existing policy or agreement, as a result of material non-disclosure.

Why use the Service?

The Insurance & Savings Ombudsman is a free and impartial service. While member companies must accept the Ombudsman’s ruling, you do retain your right to take your case through to the disputes tribunal or the courts, should the Ombudsman not rule in your favour.

Going Legal

If you need to go legal, the best advice I can give is to get yourself a specialist insurance lawyer. Insurance law is quite complex and insurers engage specialist lawyers to argue their position. Do not use a lawyer that just tells you what you want to hear. Understand the risks and the costs. Litigation is typically long and expensive.

Finally, I would remind you of the “clean hands” doctrine.  This is a rule of law that someone bringing a lawsuit or motion and asking the court for equitable relief must be innocent of wrongdoing or unfair conduct relating to the subject matter of his/her claim. In other words, do not bend the truth or exaggerate your claim.


[1] Section B, Clause 4.1 of the Financial  Services Ombudsmen’s Terms of Reference 1 January 2010 (as amended 1 July 2010).

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