Is it time for those that handle insurance claims to be regulated?

I chose this image on purpose as the old logo of the Chartered Institute of Loss Adjusters was the scales which was to show they were impartial. In far too many cases this is no longer the case.

I chose this image on purpose as the old logo of the Chartered Institute of Loss Adjusters was the scales which was to show they were impartial. In far too many cases this is no longer the case.

Yesterday The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 was passed through parliament.

The Bill, which at the time of writing has not received Royal Assent (the signature of the Governor General), will extend the unfair terms protections for consumers in the Competition and Consumer Act 2010 and Australian Securities and Investments Commission Act 2001 to those businesses with less than 20 employees.

This I think most of us would see this is a good thing as some large firms do use their power to force the smaller party to accept unfair contract terms. The protections relate to the terms of standard form contracts valued at less than a prescribed threshold.

As we see more and more of this behaviour creep into insurance claims in this soft market I have been asked several times over the past 24 hours as to whether this legislation will effect insurance claims.

Disappointingly, it appears not as Section 15 of the Insurance Contracts Act of 1984 states:

 

INSURANCE CONTRACTS ACT 1984 – SECT 15

Certain other laws not to apply

             (1)  A contract of insurance is not capable of being made the subject of relief under:

                     (a)  any other Act; or

                     (b)  a State Act; or

                     (c)  an Act or Ordinance of a Territory.

             (2)  Relief to which subsection (1) applies means relief in the form of:

                     (a)  the judicial review of a contract on the ground that it is harsh, oppressive, unconscionable, unjust, unfair or inequitable; or

                     (b)  relief for insureds from the consequences in law of making a misrepresentation;

but does not include relief in the form of compensatory damages.

The concern as to the way some clients are being treated is real and is of increasing concern to many of us within the industry, not to mention the insured’s themselves.

How can it be that brokers and other advisers who arrange the insurance need to have a certain level of education and are subject to regulation when anyone with absolutely no experience or insurance qualifications can make decisions on claims and can adversely effect home and business owners with life changing consequences.

As the Financial Conduct Authority [“FCA”] (United Kingdom) stated, correctly in my mind, that claims are generally
considered to be the moment of truth for the policyholder.

The FCA found that many of those surveyed felt their claims had been delayed and unfairly handled. In my own study 1 in 4 respondents felt that loss adjusters withheld payment to force them into a lower settlement.

This is a very real concern that I share and I have come to conclusion that the way we are handling claims is broken and the customers need more help and their needs to be harsher penalties for those that unfairly delay or refuse to pay valid claims. The start is to have regulation to control who handles claims and ensure they have training on ethics and policy coverage.

 

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