ASIC calls on insurers to learn from ‘Black Summer’ bushfires

A review of claims handled in the aftermath of the Black Summer bushfires by the Australian Securities and Investments Commission (ASIC) has highlighted gaps in how the insurance sector handles major disaster events. 

ASIC deputy chair Karen Chester said that the review provided valuable insights on how well insurers performed on key consumer outcomes during the “Black Summer” bushfires. 

“While we identified areas for improvement, overall outcomes across the 8,801 claims revealed improved claims handling practices by insurers,” she said.

With new insurance claims handling reforms set to commence from January 2022, the regulator said that it would be sharing its findings with insurers ahead of the impending fire season.

Ms Chester urged insurers to manage claims efficiently, honestly and fairly, and reminded consumers that the real value of an insurance policy is tested when they need to claim.

“It is important that claims are resolved quickly, that the process is consumer-centric, that repairs and rebuilds are timely, and that consumers are supported as well as possible after a disaster,” she said.

Of the 8,801 claims reviewed by the regulator, 99 per cent were approved. Eighty-eight per cent of claimants accepted the insurer’s decision within four months of lodging their claim. 

Ultimately 93 per cent of claims were closed, 5 per cent were withdrawn and 2 per cent remained open as of September 2021. 

In anticipation of the coming disaster season, the regulator encouraged insurers to undertake simulation exercises to stress-test their responses to simultaneous disasters and other mass claim events. 

In their review, ASIC found that some insurers fell short when it came to the quality, accuracy and reliability of the claims information they recorded.

Ms Chester called on insurers to invest in better systems, processes and internal controls. 

“Measuring consumer outcomes – and doing so well – is today’s must‑have for the insurance industry,” she said.

Other shortcomings highlighted by the regulator included a tendency to include debris removal as part of the sum insured rather than as an additional benefit. 

ASIC noted that this arrangement may contribute to situations where consumers are underinsured.

“Products must not only be fit for purpose to meet consumers’ needs, but insurers also need to record accurate data to know how they are performing when handling claims,” Ms Chester reminded the sector.