Australia's integrated corporate, markets, financial services regulator has carried out a review of how insurers investigate motor vehicle claims suspected of being fraudulent and has found that investigation practices are leading to poor consumer outcomes.

The Australian Securities and Investments Commission (ASIC), in a report released last week, reveals that while only a small proportion of claims are investigated, over 70% of investigated claims are found to be valid and then paid.

This contrasts with only a very small number of investigated claims being declined due to fraud (4%). ASIC’s research raises concerns that consumers are being worn down by a lengthy and confusing process, ASIC said in a statement.

Many consumers who had their claim investigated and eventually paid reported poor practices by insurers and their investigators, including:

• interviews that felt like interrogations, with some investigators suggesting to consumers that they had fabricated their claim;
• interviews in consumers’ homes, excessively long or successive interviews, and interviews without notice;
• onerous, unexplained and successive information requests for a wide range of documents including criminal record checks, social media histories, birth certificates, telephone and text message records, financial statements for every bank and loan account and information about family members and friends; and
• inadequate support for additional needs such as consumers with limited English literacy not being offered an interpreter.

ASIC is calling on the industry to respond to these findings by implementing better standards, improving written communication to consumers, and reviewing how claims are selected for investigation.

Fraud investigations

“Fraud is a serious issue. Insurers need effective systems to detect, investigate, decline and deter fraudulent claims,” said ASIC Commissioner Sean Hughes.

“But we found insurers are putting a significant proportion of consumers through a harmful and unreasonable process, even where their claims are ultimately paid.”

‘When it comes to insurance, consumers should expect and do deserve better. Consumers deserve a fair process for investigated claims. Insurers must live up to the promise to pay on the policy where the claim is a genuine one.’

ASIC analysed internal policy documents, standard form communication and aggregated comprehensive motor insurance claims data from five general insurers: Allianz, Auto & General, IAG, Suncorp and Youi. ASIC also commissioned consumer research as part of this review with consumers who had their claim investigated and paid.

ASIC undertook the review to understand how general insurers investigate insurance claims suspected of being fraudulent, and to seek to raise industry minimum standards. This work forms part of ASIC’s broader priority to address harms in insurance.

Consumers who are unhappy with how their claim is being handled are encouraged to contact their insurer’s internal dispute resolution team. Consumers who are unhappy with their insurer’s response can also complain to the Australian Financial Complaints Authority.