Want to make sure your brokerage is staying on top of its game? Then you can learn from this Insurance Brokers Code of Practice case study.
The policyholder held comprehensive motor vehicle insurance which had been sourced by the broker, who was acting on behalf of the insurer. When the vehicle was damaged, the policyholder lodged a claim.
The broker denied the claim, saying that the damage was not covered under the policy. The policyholder lodged a dispute with the Financial Ombudsman Service (FOS). Because the policyholder had not gone through the broker’s internal dispute resolution (IDR) process, however, FOS referred the matter back to the broker. The broker upheld its claim denial at IDR.
Dissatisfied, the policyholder came back to FOS. The dispute was considered further by FOS and issued a determination in the broker’s favour, finding that the damage was not covered by the policy as it was due to a mechanical fault.
Although FOS upheld the claim denial, it also identified some concerns about the broker’s complaint handling, notably:
- the claim denial letter and final decision letter were both signed by the same employee, bringing into question the fairness and transparency of the final decision, and
- the claim denial letter did not include contact information for FOS.
On this basis, FOS referred the matter to the Code Compliance and Monitoring team for investigation.
As part of its investigation, the Code Compliance and Monitoring team wrote to the broker on behalf of the Insurance Brokers Code Compliance Committee (the Committee), asking for the broker’s response to the concerns raised.
The broker explained that although the letters were signed by the same employee, the complaint had been reviewed by its four-member IDR Committee. To prevent future confusion, the broker began signing all IDR responses with “on behalf of the IDR Committee”.
The broker also agreed to self-report a breach of Service Standard 10 for its failure to provide FOS contact information in its IDR response. To determine whether this omission was systemic or isolated, the broker reviewed 10 other IDR matters. It found that the breach was a one-off error resulting from the particular circumstances of the claim.
Key takeout for brokers
Brokers must comply with their obligations under the Code and ASIC Regulatory Guide 165 to ensure that they handle complaints in a fair and transparent manner.
Even where a client has already lodged a dispute with FOS, the Committee expects brokers to inform the client of their right to access external dispute resolution. This ensures that the broker has provided a final response that is compliant with the Code and RG 165 and the policyholder is aware of how to escalate their complaint if they remain dissatisfied.
The complaints process should, where possible, be conducted by an independent staff member who has not previously handled the matter. This ensures a fair IDR process and removes any perceived lack of transparency.
This year the Committee will be conducting an own motion inquiry into the adequate handling of clients’ complaints and disputes. The inquiry will benchmark current industry practice and the performance of Insurance Brokers with their Code obligations in this area.
Are you on top of your Code obligations? Visit the Insurance Brokers Code of Practice website at www.niba.com.au/codeofpractice