Insurance customers guilty until proven innocent

Racial profiling, threatening to report relatives to immigration and claims processes dragging out for over three years are just a few of the shock assertions made in a new report that delves into how insurance companies handle customer’s claims – highlighting the importance of a broker.

The Financial Rights Legal Centre says key findings in their new report, Guilty until Proven Innocent: Insurance investigations in Australia, raise serious concerns about pressure tactics used by general insurance companies in claims handling and assessment.

“We regularly hear of consumers being threatened with the rejection of their claim or other outrageous conduct such as having their relatives reported to immigration,” says Financial Rights Principal Solicitor Alexandra Kelly.

“Many of our clients feel that they have been subject to racial profiling and others with poor English skills have not had access to appropriate translators.

“The tactics revealed in the recent CommInsure scandal are the tip of the iceberg.”

The centre’s report details the trials faced by 37 callers that were accused or suspected of fraudulent behaviour.

Of those consumers, more than half were of an ethnicity that was not Anglo-Celtic.

“And those ethnicities do not make up a majority of Australia, so there is a disproportionate number,” says the report’s author, Financial Rights Legal Centre Policy and Advocacy Officer Drew MacRae.

The report also shows that some consumers are also subject to incredibly long interviews – sometimes over five hours in length.

“Our clients routinely feel bullied, harassed and intimidated by investigators and often describe being treated like criminals,” says Kelly.

Kelly says customers who use the services of an insurance broker aren’t investigated by insurance companies anywhere near as often as those who go direct through insurers.

She adds that customers who use brokers are less likely to accidentally say something inconsistent that could raise the suspicions of an insurer.

“There’s a few that use brokers. But they’re not the ones that get investigated as brutally,” she says.

In addition to case studies the report also draws on a survey of insurance law service callers, interviews with insurers and investigators, as well as an analysis of Financial Ombudsman Service decisions.

It found that the average investigation and dispute length is close to 18 months, with some taking over three years.

“Customers seriously just get jacked of the process. They get sick of it and they drop out,” says MacRae.

Adds Kelly: “What we see though when insurer’s allegations of fraud are actually put to the test by the industry referee is that that the vast majority are simply unfounded.”

The report also asserts that the incidence of insurance fraud is routinely exaggerated.

“The industry regularly throws around a $2.1 billion annual insurance fraud figure but it turns out that this is based on a 20 year old estimated percentage of claims insurers ‘believed to be fraudulent’ rather than on any proven fraudulent claim data,” says Kelly.

“We of course are not saying that fraud doesn’t exist. It does. However it is this type of exaggerated rhetoric that builds a ‘guilty before proven innocent’ culture and ultimately helps justify the industry’s poor treatment of policyholders.”