Many claims denied for wear and tear issues, subsequently overturned.
Too many insurers are relying on maintenance or wear and tear exclusions to deny claims, the General Insurance Code Governance Committee (the CGC) has found in a report published today.
The report, Making better claims decisions, presents the findings of an inquiry which examined the way insurers use information and data from complaints to improve business processes, practices, and compliance with the General Insurance Code of Practice.
Information provided by the insurers that participated in the inquiry shows that in 2021-22, a quarter of denied home insurance claims, about 11,000 in total, resulted in complaints.
While the primary objective of the inquiry was to examine insurers’ use of information and data from complaints for improvements, the analysis revealed an emerging issue with more than half of the denied claims decided based on maintenance or wear and tear exclusions. And, alarmingly, nearly half of these were later overturned in favour of the consumer.
Chair of the CGC, Veronique Ingram, expressed concern about the finding.
“We are concerned that so many claims were incorrectly denied on the basis of wear and tear or maintenance exclusions,” Ms Ingram said.
“It indicates that there may be underlying systemic issues in decision-making from insurers when wear and tear is a factor.
“We expect insurers to carefully consider a range of factors in assessing a claim with the aim of coming to a reasonable, fair and sound decision.”
The report found that 45% of expert assessments offered a recommendation for a decision on a claim.
“There were too many instances of claims being denied following a recommendation from an expert whose reports failed to sufficiently justify their assessments,” Ms Ingram said.
“Of course, experts have expertise, and we rely on this in many situations. But it is also important to remember that denying a claim involves more – there are other factors that we expect insurers to consider when weighing up a decision.”
The CGC’s report also noted that while insurers had made improvements based on information and data from complaints, there was much room for improvement.
Ms Ingram reiterated the importance of using information and data to produce better outcomes for consumers.
“The information and data on overturned claims decisions is a rich resource for insurers. It can really uncover systemic issues in systems and processes and provide valuable insights,” Ms Ingram said.
“Insurers must realise that collecting data and taking the time to analyse it is fundamental to understanding what is happening and what needs to improve.
“And, importantly, it can lead to better decisions and a reduction in complaints.”
The report praised insurers that had made improvements based on data and urged all to enhance their data analysis to extract insights and take proactive measures to implement necessary changes.
**About the General Insurance Code Governance Committee**
The General Insurance Code Governance Committee is an independent body responsible for overseeing and enforcing the General Insurance Code of Practice. The Committee is dedicated to promoting fair, transparent, and customer-focused practices within the general insurance industry.