ASIC’s review finds car insurance investigations treat consumers unfairly

ASIC’s review of how insurers investigate motor vehicle claims suspected of being fraudulent has found that investigation practices are leading to poor consumer outcomes.

The review report reveals that while only a small proportion of claims are investigated, over 70 per cent 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 per cent). ASIC’s research raises concerns that consumers are being worn down by a lengthy and confusing process.

“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.”

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.

The regulator undertook this review to understand how general insurers investigate insurance claims suspected of being fraudulent, and to seek to raise industry minimum standards.ASIC is calling on industry to respond to these findings by implementing better standards, improving written communication to consumers, and reviewing how claims are selected for investigation.

This work forms part of ASIC’s broader priority to address harms in insurance. ASIC will monitor industry responses to our findings and will take enforcement action if conduct that breaches existing laws is identified. The entire report is now available for download t: Report 621 Roadblocks and roundabouts: A review of car insurance claim investigations