Learning from claims related recent dispute trends If we look at some of the complaint trends we can observe recent claim related dispute trends. Top issues for claims dispute AFCA’s decision outcome for fraudulent claims Insurance contracts act is the top compliance failure reason for claim related disputes Resolving claim disputes with […]
https://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2021/02/CV-Blog-Claims-afca-insights.jpg?time=161490433312511668Dilip Mohapatrahttps://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2019/08/Cognitive-View-logo-04x-1-1030x184.pngDilip Mohapatra2021-02-22 22:20:502021-02-22 22:25:05Supporting claim disputes with AFCA Insights
Royal Commission’s final report recommended that insurance claims handling should not be excluded from the definition of ‘financial services’, reflected issues arising from a number of case studies examined. In general insurance, as demonstrated by several case studies, poor conduct included: Failing to handle claims in a fair and transparent manner, failing to act in an […]
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Learning from claims related recent dispute trends If we look at some of the complaint trends we can observe recent claim related dispute trends. Top issues for claims dispute AFCA’s decision outcome for fraudulent claims Insurance contracts act is the top compliance failure reason for claim related disputes Resolving claim disputes with […]
https://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2021/02/CV-Blog-Claims-afca-insights.jpg?time=161490433312511668Dilip Mohapatrahttps://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2019/08/Cognitive-View-logo-04x-1-1030x184.pngDilip Mohapatra2021-02-22 22:20:502021-02-22 22:25:05Supporting claim disputes with AFCA Insights
Royal Commission’s final report recommended that insurance claims handling should not be excluded from the definition of ‘financial services’, reflected issues arising from a number of case studies examined. In general insurance, as demonstrated by several case studies, poor conduct included: Failing to handle claims in a fair and transparent manner, failing to act in an […]
https://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2021/02/CV-Blog-Claims-Supervision-scaled.jpg?time=161490433319202560Dilip Mohapatrahttps://secureservercdn.net/166.62.111.84/ezb.f55.myftpupload.com/wp-content/uploads/2019/08/Cognitive-View-logo-04x-1-1030x184.pngDilip Mohapatra2021-02-21 10:46:522021-02-21 16:10:36Getting started with Claims Supervision
Learning from claims related recent dispute trends
If we look at some of the complaint trends we can observe recent claim related dispute trends.
Top issues for claims dispute
AFCA’s decision outcome for fraudulent claims
Insurance contracts act is the top compliance failure reason for claim related disputes
Resolving claim disputes with Insurance Contracts Act
AFCA’s approach document “The AFCA Approach to section 54 of the Insurance Contracts Act” is a guideline for firms to understand how they can resolve claim related disputes and support an efficient IDR & EDR processes. Section 54 is a remedial provision and aims to strike a fair balance between the interest of an insurer and an insured with respect to a contractual term designed to protect the insurer from an increase in risk during the period of insurance cover.
When considering a complaint and the application of section 54, AFCA determines the complaint on the basis of what is fair in all the circumstances having regard to the relevant legal principles, the terms of the policy, good industry practice including relevant industry codes and prior AFCA or predecessor scheme decisions.
Below approach outlines how AFCA evaluates and applies section 54 of the Insurance Contracts Act 1984 to insurance complaints
Learning from AFCA’s definition of complaint and resolution approach is a great way to learn and apply section 54.
When applying section 54 to complaints, AFCA will ask
What are the inherent limitations and restrictions within the claim?
Is there an act or omission that occurred after the contract was entered into that the financial firm is relying upon?
Could the act reasonably be regarded as being capable of causing or contributing to the loss?
If yes, was the act either:
> necessary to protect the safety of the person or preserve property or
> could not reasonably be avoided?
If no, has the financial firm been prejudiced by the act, and what is the extent of the prejudice?
Some of the above questions help in determining the scope and in identifying the search criteria’s to find similar disputes from the past using AFCA Insights
Identify keywords
Identify metadata like Issue, Category, Product, Specific issue, etc.
Compliance
Similar companies
Decisions outcome
Timeframe
How is this applied in practice?
Above is a real case study (315503) and as there was no evidence that driver was not an acceptable risk or would not have been insured by the financial firm if nominated there was no prejudice to the financial firm. FOS, the predecessor of AFCA found in favour of the complainant.
Sign up here for Cognitive View’s AFCA Insights (Sign up here)
Who can use AFCA Insights tool?
Financial firms, consumers and consumer representatives who have an insurance complaint at AFCA involving technical policy exclusions.
Lawyers and other professionals who are assisting the insurance claims process.
Anyone who wants to understand how AFCA applies legal principles, industry codes and good industry practice when considering insurance complaints involving s54.
Here is a full list of AFCA complaint resolution approaches.
Royal Commission’s final report recommended that insurance claims handling should not be excluded from the definition of ‘financial services’, reflected issues arising from a number of case studies examined. In general insurance, as demonstrated by several case studies, poor conduct included:
Failing to handle claims in a fair and transparent manner, failing to act in an efficient, professional and practical manner, and breaching the insurer’s duty of utmost good faith;
Delays in claims that resulted in consumer detriment. The cause of the insurer’s poor conduct was “was largely attributed to its internal systems and processes for handling claims and dispute arising from those claims”.
Further, the Commissioner highlighted several instances where insurers fell below community standards and expectations, these included:
Implementing an inadequate system to train case managers and inadequate systems to oversee the actions of case managers; and
A lack of robust systems to avoid potential conflicts of interest; and
A failure to have adequate systems in place to ensure that its Internal Dispute Office conducted a robust analysis of declined claims, in a way that was independent of the claims team; and
A failure to engage with external dispute resolution in a frank and cooperative way
Proposed regulatory change to support claims as a financial service
In implementing the Royal Commission’s Recommendation 4.8, Treasury proposes a two-pronged approach:
1. Remove Regulation 7.1.33; and
2. Use existing legislative powers to define the activity of handling or settling an insurance claim as a ‘financial service’ for the Corporations Act’s purposes.
The proposed regulatory change applies to insurers and third-party representatives of insurers that provide claims handling service.
The requirements that could apply differently depending on the type of advice provided (general versus personal) and the insurance product. Examples of provisions that could apply include:
general obligations on an AFS licensee that apply to the financial services that it provides;
providing a Financial Services Guide;
general advice warnings;
conduct obligations (which apply to the provision of personal advice to retail clients);
conflicted remuneration;
providing a Statement of Advice when providing personal advice to retail clients; and
training obligations.
Supervision in the claims decision-making process reduces unsubstantiated claim rejections and discrimination. To support compliant claims process and fair customer outcomes AI & Big data analytics can provide appropriate oversight and transparency mechanisms. A systemic approach is required to establish compliance and conduct risk for adequate supervision.
As a first step, establish and document the system of internal controls and processes that requires supervision. The supervision process should include the complete customer engagement lifecycle depending on the compliance requirement and the role the entity plays in the value chain. This may consist of sales, support, claims, complaints.
One of the significant causes of claim-related disputes is information asymmetry and customers not meeting disclosure requirements which can be avoided in the policy sales by agents with improved supervision. Below are some of the critical steps in establishing a compliance and conduct risk management process.
Identify Policies & Obligations: An effective internal controls system typically includes a centralized documented inventory of key processes and policies and of the controls. To support a risk-based supervision model, identify risk for each of the compliance and conduct requirements. Since Insurers will anticipate risks from customer’s day-to-day communication monitoring, consider the impact of the changes in risk dynamics.
Control Automation: Review manual supervision process. Augment the manual process with AI-based automation. Improve operational model to support risk automation strategies.
Reporting: Enable incident and breach management with continuous control monitoring to support the predictive decision-making process
Remediation: Support an ongoing improvement process with risk mitigation strategies
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