Insurers’ response to bushfire claims praised at royal commission

Insurance companies have drawn praise at the royal commission for their handling of claims from the Black Summer bushfires

Insurers were ‘very proactive’ in dealing with the number of natural disasters in Australia. Picture: Frank Redward

Insurance companies have drawn praise at the royal commission for their prompt and proactive handling of billions of dollars worth of claims from the Black Summer bushfires.

The afternoon hearings on the second day of the Royal Commission into Natural Disaster Arrangements heard from John Price, the lead ombudsman for insurance at the Australian Financial Complaints Authority.

Mr Price said AFCA hadn’t detected any systemic issues in terms of the insurance industry, but rather noted that since the 2009 Black Saturday bushfires, insurance companies had become “conciliatory in their approach” and “very proactive” in dealing with the number of natural disasters in Australia.

“In the last financial year, we’ve received over 14,000 general insurance disputes. Yet we have received only 68 general insurance disputes related to this bushfire,” Mr Price said.

“I think that indicates to me, at this stage, that the insurance industry has performed reasonably well and proactively.”

Mr Price said the sector’s response to natural disasters had “significantly improved”, with only 21 of the 68 complaints outstanding.

In addition, Senior Counsel Assisting Dominique Hogan-Doran SC, citing figures from the Insurance Council of Australia, said the percentage of bushfire-related insurance claims that had been denied was 0.66 per cent from the 34,679 bushfire-related claims worth $2.2bn — almost six times lower than the 3.9 per cent rate each year.

As bushfires raged across the eastern seaboard on January 5, insurance company representatives and federal regulators were warned by the federal government to deal with people fairly and swiftly or face consequences.

The total insurance bill from the summer reached $4.6bn across several natural disasters and 242,000 claims.

AFCA is the independent internal dispute resolution service for the financial sector, providing consumers and small businesses a free service to investigate complaints regarding financial firms.

However, despite the praise, Mr Price said there was room for improvement in the clarity of insurance policies provided.

“There’s a need to have the debate around standard levels of cover which can’t be contracted out on. Standard definitions which clearly explain to consumers what they’re entitled to. So that people can understand the type of cover they have purchased,” Mr Price said.

“If an insurer is going to step away from that type of cover, they make it very clear, not hide it in the body of the policy, but make it very clear and upfront that this is no longer covered.”

Mr Price also foreshadowed that insurance affordability would be an issue in the future with an increase in the cost of insurance “across the board”.