Regulators issue stern warning for insurance industry amid premium hikes, soaring complaints

Regulators have ordered Australia’s insurance industry to clean up its act amid premium hikes and soaring complaints. Have your say.

Regulators have warned the Australian insurance industry to clean up its act – or else – as the sector’s profits boom amid steep premium hikes and soaring complaints.

Official data shows that after a Covid slump general insurance profits soared by 195 per cent in the year to the end of March to reach $3.7bn, eclipsing the pre-pandemic result of $3.5bn in 2019.

Over the same period, average home insurance premiums skyrocketed by 28 per cent, according to a report released by actuaries this week, as companies jack up prices in response to last year’s devastating floods.

Karen Chester lashed the industry, telling News Corp the regulator was frustrated with the failure of insurers to properly staff claims handling. Britta Campion / The Australian

And general insurance complaints are up 50 per cent on last year, while complaints about delays to claims rocketed by 76 per cent, according to Australian Financial Complaints Authority data.

The Australian Securities and Investments Commission’s deputy chair Karen Chester lashed the industry, telling News Corp the regulator was frustrated with the failure of insurers to properly staff claims handling and saying insurers couldn’t blame extreme weather for all of their home insurance problems.

ASIC this week released a report flaying insurers over their lackadaisical handling of claims from natural disasters including the floods that wreaked havoc across vast swathes of Queensland and NSW early last year.

Ms Chester at the ASIC Annual Forum 2022 at the Hilton in Sydney. Picture: Britta Campion / The Australian

The report forms part of a broader crackdown on the industry that includes several active investigations, $815m in refunds for people overcharged by insurers, and sweeping bans on shonky products that saw 67 pet insurance policies branded with household names including Woolworths, RSPCA and Medibank temporarily yanked off the shelves in June.

ASIC is also looking closely at inconsistent definitions of things like fire and water damage and whether insurers are using “wear and tear” as an excuse to avoid paying claims.

The sector is also under the spotlight in Canberra, with the minister responsible for insurance, Assistant Treasurer Stephen Jones, calling a parliamentary inquiry into its response to the floods last month.

“Looking at ASIC’s endeavour across the insurance space, and if you wanted to put it under one banner, it’s ‘get the basics right,’” Ms Chester said.

“It shouldn’t be down to the regulator to be lifting the bonnet on insurers’ own claims handling performance and consumer experience, then telling insurers and their boards how to get their house in order.

Allan Hillls’ home was damaged by the earthquake that hit Victoria in September 2021 but his insurer, GIO, refuses to pay to fix it. Picture: Jake Nowakowski

“They have all the data themselves. All of our findings, all of the poor practices, all within the insurers’ control – well within their own sphere of influence.”

She said extreme weather events were now the “new normal” and there was “a level of frustration” at ASIC about the resources insurers were putting into claims handling.

“When you talk to insurers about accessibility and affordability of home insurance and extreme weather events, they say ‘it’s public policy needs to be fixed, things are out of our control,’” she said.

“And yes, we acknowledge that many things are not within their control. But this is all in their control, and they need to get their house in order.

“And if you don’t, there are consequences. From reputational through to regulatory intervention through to enforcement.”

Mr Jones said the industry had been making “bloody good returns on capital”.

“Consumers are right to ask, in a period where we had a significant jump up in premiums, how come we’re asking questions about whether insurance is affordable when insurers are making a massive underwriting profit,” he said.

“We support the industry in their position around climate change induced severe weather events and the need for us to spend more on mitigation, investment in infrastructure, all of that,” he said.

“But the quid pro quo is that they’re doing their bit to ensure they’re improving the claims handling experience and ensuring that the products they’re offering are up to scratch.”

An Insurance Council of Australia spokesperson didn’t answer News Corp’s detailed questions about the industry but said it was vital to have a “robust and profitable insurance sector to help families, businesses, and communities get back on their feet.

“Insurer profits are cyclical and often impacted by factors outside of the control of the businesses, including extreme weather events. Insurers faced historically low profits in 2020, 2021, and 2022, and recent improvements in profitability, largely due to a significant turnaround in investment returns and improvements in some commercial lines, should be seen in that context.”

Originally published as Regulators issue stern warning for insurance industry amid premium hikes, soaring complaints