Consumers (people and businesses) purchase insurance to protect against risk.
An insurance product is a contract.
- Consumer owns asset (self, house, car etc);
- Consumer will be paid a certain sum if asset lost, or have it repaired, if the risk takes place.
An insurance company does not usually inspect the asset prior to contract so it relies on the consumer telling it correct information about the asset and the consumer.
The consumer and insurance company both have a duty to act in utmost good faith with each other.
This means the consumer:
- Is truthful about its past;
- Is accurate about the asset; and
- Will take care of the asset.
This means the insurance company:
- Will be clear about what information it needs to decide to issue the insurance;
- Will be clear about what risks it insures and how it covers them; and
- Will act faithfully in how it undertakes claims management and decision making.
So, the key points are:
- Insurance cover is a contract;
- What is covered and how a claim operates is set out in the certificate of insurance and policy document;
- When taking out insurance and afterwards, a consumer must be honest and act reasonably;
- The insurance company must act in utmost good faith.
Consumers should read the policy, or at the very least the important parts, which are:
- Definitions of essential terms;
- What is covered;
- What is not covered;
- General exclusions;
- What risk is covered and how a loss will be dealt with – look for repairer selection, associated losses cover and what is meant by total loss.
Consumers should always ensure the details on the certificate of insurance are accurate.
Codes of conduct
An insurance company will usually have a company policy governing how claims will be processed and internal reviews. Often some of this will be part of the policy document. A consumer can always ask if the insurance company is following their own procedures.
Insurance companies must also comply with:
- Insurance Contracts Act and Regulations;
- Any voluntary code of conduct they have signed up to; and
- External review process voluntarily joined (e.g. FOS) or by law (e.g. SCT). See below for definitions.
Insurance companies need to give consumers any relevant document (investigation report, medical reports) they use when deciding on the claim. Consumers should ask for this information during a claim process.
Exclusions can apply if fraud is used as reason.
Common battleground matters
- Failure to disclose information when taking out the insurance – e.g. past driving breaches.
- Failure to maintain the asset which caused the loss – e.g. not repairing a leaking roof.
- Risk falling outside insurance cover – e.g. flood damage instead of storm damage (now less frequent), not being permanently disabled from working.
- Disqualifying event contributing to loss – e.g. driving under influence of alcohol or drugs
Review process and Court action
The claim process and reviews look like this:
- Insurance contract is formed – certificate and policy issued;
- Event causing loss occurs;
- Claim is lodged;
- Claim is investigated;
- Insurance company pays claim – or;
- Insurance company makes preliminary determination to deny claim and seeks response from consumer;
- Insurance company denies claim;
- Internal review lodged, investigated and decision made – if over-turned claim is paid, if not, then;
- Application for review lodged with FOS, SCT or Court.
- FOS – internal review, submissions, mediation or adjudication;
- SCT – internal review, submissions, hearing and adjudication;
- Court – claim, defence, disclosure, ADR and trial.
FOS – financial ombudsman service
SCT – Superannuation complaints tribunal
FOS & SCT are merging in late 2018.
Key advice and tips
- When taking out insurance always give more not less information on your medical or claims history. If in doubt check with your GP or past insurance companies.
- When making a claim give all relevant information accurately and quickly. You can also check if they really need the information or are entitled to it.
- If there is a dispute about what was said when taking out the insurance, ask for a copy of the call.
- If you feel the claims officer is not being fair or treating you poorly, get a new one. Complain to their manager until they are replaced. A new claims manager can make a big difference to the process and outcome.
- Track how long they are taking to move the claim along. Many insurance companies have now agreed to make a claim decision within 60 days of claim being lodged (including relevant information).
- Always go back and read the policy document. Both sides are bound by these terms. One might help your case.
- Keep all evidence to demonstrate your claim – e.g. photos, receipts.
- Contents insurance – take a video of each room of your house, including garage and sheds, and open cupboards, to record all your contents. You may want to up your insurance after this! With each new large purchase take a photo of it and the receipt. Store this evidence online (cloud based) or away from where the contents are located. (e.g. with family or work).
Get legal advice. It does not usually cost anything just to run past a lawyer what is happening and get some guidance. Community Legal Centres can assist.
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice. For detailed legal advice call Matus Lawyers on 0417 748 861.