Horror year of wild weather sparks jump in insurance complaints

Customer complaints about home and motor insurance have surged as the industry faces a wave of payouts for floods, storms and other natural disasters, which has led to delays in sorting out claims.

Figures from the Australian Financial Complaints Authority (AFCA) will on Wednesday show a horror year of natural disasters helped drive a sharp lift in complaints about delays in insurance claims handling last financial year.

Complaints about insurers have increased amid a wave of natural disasters including this year’s catastrophic East Coast floods.Credit: Dan Peled / Getty Images

Complaints flowing from natural disasters, such as this year’s catastrophic flooding NSW and Queensland and Victoria’s earthquake last September, more than doubled to 1586 over the year, up from 653, AFCA said.

Complaints about home building insurance products surged more than 70 per cent in the year, while complaints about motor cover rose by almost a third.

AFCA said while many insurers had allocated staff to deal with the influx of natural catastrophe claims, this appeared to have created delays in sorting out other types of claims. The number of complaints about delays in claims handling across all general insurance products jumped by more than 50 per cent, to 4804 during the year.

The annual data showed banks remained the most complained-about financial businesses overall. It also underlined the growing number of complaints about scams, including those occurring in the nascent and unregulated cryptocurrency sector.

The big four banks accounted for almost 20,000 complaints, a rise of almost 10 per cent. The top four insurers accounted for 9400 complaints.

AFCA

AFCA chief ombudsman David Locke said insurance companies faced challenges in resolving claims due to shortages of building materials, parts, and labour, but he was nonetheless concerned by the number of disputes making their way to AFCA.

“We get that there’s a lot of issues, but we really want to understand what the causes of the complaints are, and work with the insurers to try to resolve some of these,” Locke said.

He added that most of the complaints against insurance companies were about delays in claims handling, as opposed to payouts being refused.

A spokeswoman for the Insurance Council of Australia said the industry was working to support affected property owners and communities recover from extreme weather, and this year’s east coast floods had led to more than 225,000 claims, and an estimated $4.83 billion in insured damages.

The community came together in Lismore to help with the clean up in March.Credit: Brook Mitchell

“Insurers are working hard to resolve claims as quickly as possible and have put on hundreds of extra staff to support claims processing,” the spokeswoman said.

“The Insurance Council and insurers continue to collaborate closely with AFCA through in-person and online community forums, and to gain insights into opportunities for enhanced and quicker complaints resolution.”

AFCA was set up by the Turnbull government, which merged various ombudsman schemes when it was resisting a royal commission into the banking financial services sector. The authority deals with disputes that cannot be resolved by companies’ own dispute resolution processes.

Banking remained the sector with most overall disputes: the products that were most complained about were credit cards, transaction accounts, home loans, and home and motor insurance. AFCA said the big four banks accounted for almost 20,000 complaints, a rise of almost 10 per cent. The top four insurers accounted for 9400 complaints, an increase of 19 per cent.

The data also showed a 40 per cent rise in cryptocurrency-related complaints, albeit from a very low base to 198 complaints in the year because crypto firms are unregulated and therefore not required to belong to the AFCA scheme.

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