Improving complaints handling for Australian insurers

6 minute read  13.01.2025 Kemsley Brennan, Emma Farrell

In December 2024, ASIC found Australian general insurers are failing to properly implement the Internal Dispute Resolution regime. We explore key areas for improvement and recommended actions.

In December 2024, the Australian Securities and Investments Commission (ASIC) released Report 802 Cause for complaint: Complaints handling in general insurers (REP 802), containing findings from its review of 11 Australian general insurers compliance with select enforceable obligations in Regulatory Guide 271 Internal dispute resolution (RG 271). Australian financial firms are required to have an internal dispute resolution (IDR) system in place that meets the standards and requirements prescribed in RG 271. REP 802 identifies 5 key areas for improvement in complaints handling, and this article outlines the improvements to be made.

The areas for improvement

Failure to identify complaints

Finding: Insurers are not identifying and recording all complaints.

RG 271 requires insurers to proactively identify any expression of dissatisfaction that meets the definition of 'complaint' and deal with those complaints under their IDR process. By failing to identify 1 in 6 complaints in the time of the review, individual customers have been denied important consumer protections of the IDR framework (i.e. not receiving an outcome at all, or the full or fairest outcome to which they are entitled) and opportunities to identify systemic issues have been missed. ASIC is concerned that missed complaints highlight other failures, such as staff and system errors, process challenges and lack of consistent or fulsome quality assurance activities.

Failure to identify systemic issues

Finding: Half of insurers reviewed have not been able to identify a single systemic issue

AFCA has identified a significantly increased proportion of systemic issues as against those identified in insurer complaints. In some cases, AFCA has identified more systemic issues from a much smaller cohort of complaints escalated to AFCA than the insurer did from a far broader suite of complaints the insurer received. It is essential to identify and resolve systemic issues early to minimise adverse customer outcomes.

ASIC is particularly concerned by significant inconsistencies in insurer's data which has made it difficult to track complaint outcomes and fully understand complaint drivers, leading to a lack of focus on identifying systemic issues.

System constraints and data

Finding: Insurers have immature systems for complaints handling and reporting on complaints

ASIC reports that almost all insurers' IDR systems failed to record when complaint outcomes were actually provided to customers, and so insurers have had no visibility of how long complainants were waiting before receiving an outcome from the IDR process. It is necessary to make improvements to ensure customers have a positive customer-centric experience.

ASIC has expressed concern that almost all insurers failed to demonstrate that they kept their promises to customers by implementing outcomes in a timely manner, all insurers lacked robust controls (e.g. tracking, system alerts and/or reporting) to monitor and support implementing complaint outcomes, insurers failed to properly capture key data points for complaints management (if at all) and some insurers did not have fully integrated systems or had design limitations in systems.

Communication failures

Finding: Every insurer was non-compliant with one or more of their obligations under RG 271

ASIC notes there were significant variations in the level of non-compliance between insurers, but communication was a key area of variability. For most insurers, IDR response content requirements for rejected complaints and delay notification content requirements were not met and delay notifications were not provided within required timeframes. ASIC attributed these errors to poor templates, system designs, inadequate training, resource constraints, staff capability and errors and sub-optimal processes.

Importance of a positive complaints management culture

Finding: A key driver for most serious issues was an absence of a positive complaints management culture

ASIC was able to identify a number of root causes contributing to the failures identified in its review, but a key driver is the absence of a positive complaints management culture, which understands the value of identifying and addressing complaints – in terms of the insurer's relationship with customers and its own risk management.

Improvement recommendations

In REP 802, ASIC identifies minimum recommendations to be applied by the insurers:

  • Take immediate steps to comply with regulatory obligations
  • Ensure all customer complaints are identified and acknowledged
  • Identify systemic issues to improve customer outcomes
  • Invest in and improve systems, data, policies and procedures
  • Prioritise the adoption of a positive complaints management culture

Additionally, ASIC has indicated a number of additional (and more specific) recommended steps that can be taken by insurers to improve their compliance:

  • Treat complaints with respect, be helpful and adopt a user friendly approach to complaints management that demonstrates a real commitment to resolving complaints through action
  • Ensure consistent and early capture of complaints data, using systems that can collate all required data points to ensure compliance with RG 271 timeframes
  • Ensure complaints management capture and response practices and systems functions match the insurer's policies and procedures
  • Progress introduction of new systems or enhancements or upgrades existing systems without delay, to ensure all customers receive timely and accurate communications, and perform regular audit and assurance to ensure compliance with RG 271 timeframes (which is likely to enable greater identification of systemic issues). System enhancements should encompass control functions such as tracking, system alerts and reporting capabilities, data collection features and look to overcome system integration gaps or design limitations (e.g. inability to capture more than one issue or outcome for a complaint)
  • Review communication templates to ensure compliance with RG 271 content requirements and perform regular audit and assurance to ensure compliance with RG 271 content requirements
  • Undertake a complaints transformation program, where impact of uplifts is measured to ensure genuine long lasting improvement
  • Bolster and increase training on RG 271 requirements for all staff in customer service related functions
  • Regularly review and assess whether the insurer has the systems, processes resources and capabilities necessary to meet the ongoing RG 271 requirements and take prompt actions to address any identified deficiencies

For more information, please contact our team.

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