I spent yesterday browsing through the Queensland Floods Commission of Inquiry- I recommend you take a look! The link is http://www.floodcommission.qld.gov.au/publications/final-report
Obviously my interest is in insurance so I made that my focus while flicking through the Commission’s report. This is what I found.
The inquiry considered the following:
• the timeliness of insurers’ decision-making (see 12.5.1 Determination of liability)
• the adequacy of communication with policyholders (see 12.6 Communication with policyholders)
• the adequacy of the assessment process (see 12.7 Assessment process)
• the adequacy of information given to policyholders whose claims were denied (see section 12.8
Information to policy-holders whose claims were denied)
• the process and timeliness of internal dispute resolution (see 12.5.3 Timeliness of internal dispute
resolution and 12.9 Internal dispute resolution).
So what did they find?
One of the main criticisms directed at insurers in public discussion was that they took too long to decide claims and surprise, surprise, many policyholders expressed frustration and distress in complaints to the Commission, and also to the Natural Disaster Insurance Review, about the time taken to determine their claims.
But get this- in Australia insurers have an obligation to determine claims in a timely way. It is an aspect of their duty to act with utmost good faith. That sounds familiar, doesn’t it? However The General Insurance Code of Practice imposes a 10-day time limit on insurers to determine claims- 10 days! This time-frame must be met:
• from the date the claim is received if the insurer has all necessary information when the claim is lodged and no further assessment or investigation is required
• otherwise – where further information or investigation is required – from the time the insurer receives all necessary information and all investigations are completed.
Timeframes can be extended by agreement between the insurer and policyholder – though insurers are not required to adhere to the time limits set in the code when dealing with a large number of claims following a natural disaster. This point was further considered by the Commission.
As a result of the Queensland flooding, insurers received an exceptionally high volume of claims as a result of the 2010/2011 floods. The Insurance Council of Australia has reported that, as at 24 November 2011, 58,463 residential and commercial claims were made as a result of the 2010/2011 floods. Residential claims (excluding, it seems, contents claims) alone totalled 26,554. Those figures did not include all insurers, but the Insurance Council estimated that its statistics represented 96.8 per cent of all residential and commercial claims made as a result of the 2010/2011 floods and also Cyclone Yasi. Bear in mind that some of the same insurers are responsible for settling claims here in New Zealand post earthquakes- such as IAG (State and NZI) and Vero.
In a large number of cases insurers could not meet the 10-business day timeframe and delays occurred. The Natural Disaster Insurance Review reported that insurers took, on average, 28 days to accept claims related to the flood in Brisbane, four times more than the average time taken to accept claims which resulted from Cyclone Yasi. (Most Christchurch claimants would have been thrilled….)
One insurer which, on average, determines ‘business as usual claims’ in five business days, told the Commission that the average time it took to determine claims arising from the 2010/2011 floods was 35 business days. (Claims resulting from Cyclone Yasi were determined on average in 14 business days.)
Delays were more extensive in many other cases. The majority of claims which were the subject of a complaint to the Commission were determined in two to four months; the longest period of delay was nearly five months. Five months! These are the sorts of time frames that a reasonable person would expect. Two and a half years falls well outside the realms of reasonableness and it is likely that the New Zealand Courts will soon find this to be the case. Those of you with pending cases should take good note of the findings of this Commission.
Delays in the determination process undoubtedly caused distress to policyholders whose lives were significantly disrupted by the floods. The Commission therefore supported the introduction of a time limit in the Code of Practice for the determination of claims arising from a natural disaster. The Commission considered a maximum of four months to decide flood claims, though lengthy, is reasonable in extraordinary circumstances such as those that prevailed in the wake of the 2010/2011 floods. They acknowledged that four months is, however, a long time for policyholders to await decisions on their claims. They also stated that it goes without saying that insurers should decide flood claims in a shorter period of time wherever possible. As we would expect, insurers naturally argued that a number of difficulties added to delays in the determination process, including:
• the high volume of claims arising from the floods, as well as other natural disasters which occurred within the relevant period of time (discussed in 12.4.1 The number of claims)
• the complexity of some cases
• the difficulty of getting access to affected areas
• the limited availability of loss assessors and expert hydrologists
• the time taken to receive flood data and information from government agencies and councils.
After 6 months only 2% of claims were outstanding. Mind you, they managed to deny 27 per cent of all claims. The Natural Disaster Insurance Review recommended the introduction of a four-month time limit, subject to exceptional circumstances, for insurers’ determination of liability. On 10 October 2011, the Insurance Council Board agreed in principle to amend the code in line with the review’s recommendation. In November 2011, the Insurance Council reported that 85 per cent of residential claims from the 2010/2011 floods had been ‘closed’, meaning that goods had been replaced, repairs completed or cash settlements made and the insurer considered the claim ‘finalised’. The repair process was underway in the remaining 15 per cent of cases.
Well, you can imagine that I was left scratching my head after reading this. So exactly what is going on here in New Zealand – the same insurance companies are operating, but certainly not the same level of customer satisfaction or service. Could it be that they’re simply dragging the chain because they can. There is nothing in our New Zealand legislation appertaining to private insurers that states that they have an obligation to have anything sorted by ‘such and such’ a time frame nor is there apparently any desire on the part of our ‘corporate-hugging’ Government to ensure that they perform to better time-frames. Two years on and I know people who have not yet been seen by their insurer- let alone have an assessment made. Unbelievable!
It’s clear that we too need a Commission of Inquiry in New Zealand and there is no doubt that a specified time frame to perform contracts requires inclusion in the suite of obligations that private insurers must be made to adhere to. The time frames for private insurance performance in Christchurch are simply inexcusable on any grounds. I would like, very much to hear the New Zealand Government’s explanation/justification as to why we ‘leave it to the market’, whilst our Aussie neighbours take more care of their people. Well, Mr Brownlee, why would that be?
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