Why Australian insurance companies deny claims as complaints continue

The lid has been lifted on the culture of Australia’s insurance industry, as the top companies being complained about continue to surge. Have your say.

An insurance industry culture of finding ways to deny claims needs to be cleaned up to stop soaring complaints from customers, a leading consumer lawyer says.

Official data shows that complaints about general insurance soared 50 per cent in the year to the end of June, rising from 18,563 to 27,924 as the industry struggled with the fallout from widespread flooding and other natural disasters.

Complaints about delays in resolving claims soared 76 per cent, from 6,259 to

10,996, the data, published by the Australian Financial Complaints Authority, reveals.

Meanwhile, complaints about being denied coverage due to insurance policy exclusions or conditions rocketed 51 per cent, from 3222 to 4851, while complaints about inadequate payouts jumped 42 per cent, from 4419 to 6266.

In the last six months of last year, the most complained about general insurer was AAI, a division of Suncorp, followed by IAL, which is a division of IAG, with Allianz in third position, QBE in fourth and pet insurance specialist Hollard in fifth.

On Monday, IAG, Australia’s biggest general insurance company, declared a profit of $832m for the financial year, up 140% from last year as it bounced back from a Covid slump and jacked up premiums.

The Australian Securities and Investments Commission last week warned insurers to clean up their act, with deputy chair Karen Chester saying the regulator was frustrated by the industry’s failure to pour resources into claims handling to deal with the “new normal” of frequent natural disasters.

ASIC deputy chair Karen Chester. Picture: Britta Campion.

Philippa Heir, a senior lawyer specialising in insurance at the Consumer Action Law Centre, said the industry also had a culture of not trying to help customers.

“It feels like insurers are disproportionately declining claims and reliance on maintenance and wear and tear exclusions,” she said.

“And that suggests to me a cultural issue within the insurance industry – rather than looking at ‘how might we pay this claim’, they’re thinking, ‘how might we decline or partially decline this claim.’”

Industry body the Insurance Council of Australia is currently reviewing how companies handle claims, with a report due in October.

Rick Maloney, who lives in the Northern Victorian town of Mooroopna, said he had been struggling with his insurer, AAMI, since his home flooded last October.

“The first excuse was ‘we don’t cover soil movement’, and the next was ‘oh it’s because of that big tree in the backyard,’” he said.

“It was one excuse after another.”

Flooding in Mooroopna last year. Picture: Supplied.

He said he estimated the damage at between $15,000 and $30,000, which includes repacking the stumps and replacing chipboard flooring that was soaked by the water.

“I’ve sent AAMI a picture of a toadstool growing up in the crack of my floor where the floor has mould, obviously because of the floods – and I’ve got another one growing now,” he said.

“But they continue to say there’s no moisture, no dampness.”

Mr Maloney has appealed the denial to AFCA.

“I’ve got to continually fight to get something that pretty much I believe should be straightforward,” he said.

AAMI’s parent company, Suncorp, said it acknowledged that “our decision letter should have been clearer”.

“We have already agreed to finalise his claim for damaged contents and we will arrange a follow up hygienist to carry out mould testing to provide peace of mind,” a company spokesperson said.

“The challenge with this claim was determining what damage already existed before the flood, as the home was being renovated at the time.”

Originally published as Why Australian insurance companies deny claims as complaints continue