Insurance failures strike long after tragic floods: ASIC boss

Australia’s insurance industry is ill-prepared and under-resourced to assist people impacted by severe natural disasters, an inquiry has been told.

Australia’s corporate watchdog has issued a stern warning to the nation’s $86bn insurance industry over its “disappointing” failures to assist flood victims.

ASIC officials gave evidence to a federal probe looking at the impacts of insurers’ responses to one of the country’s most catastrophic natural disasters on Friday.

Public hearings, due to run over the next four weeks, have so far heard evidence of flood victims in NSW, Victoria and Queensland being subjected to aggressive and gaslighting behaviour from insurance agencies, including facing lengthy delays on claims and receiving hostile communication from third parties.

ASIC boss Alan Kirkland said systemic failures in the insurance industry had persisted in the wake of the 2022 floods.

“There are signs of deeper, longer-standing issues in the industry’s processes, practices and resourcing, which meant that it was poorly prepared for those events,” he told MPs.

“In a context where severe weather events are expected to be more frequent and more severe, the overall quality of the industry’s response to the 2022 floods and storms was disappointing.

More than 200,000 insurance claims were lodged as a result of the floods. Picture NCA NewsWire / Gaye Gerard

“As a result, we’ve put the industry on notice.”

Tens of thousands were displaced and more than two dozen people died after unprecedented flooding inundated parts of Australia’s east coast in 2022.

As a result of the disaster, about 230,000 insurance claims were lodged by flood-affected people living in South East Queensland and the Northern Rivers region of NSW.

The Insurance Council of Australia estimates the total cost of claims lodged as a result of the major flooding events totalled nearly $7.4bn.

Mr Kirkland cited recent data collected from six of the country’s biggest insurance agencies that he said painted an “illuminating” picture of the industry’s shortfalls.

“In short, they suggest that while the total level of claims handling staff has increased, the level of permanent claims handling staff has only marginally increased since 2019,” he said.

The 2022 eastern Australia floods were one of the nation’s worst recorded flood disasters. Picture: NCA NewsWire/David Crosling

“The level of resourcing for dispute resolution has failed to keep pace with the number of complaints. This is despite the fact that the proportion of cases resulting in complaints through both internal and external dispute resolution has continued to rise.

“If we see serious failures by insurers to comply with their legislative requirements we will consider enforcement action.”

Major insurance companies are due to give evidence next week.