Insurance and Financial Services Ombudsman Karen Stevens says her job has become more complex over time, but after 20 years, it’s still as enjoyable as ever.
Stevens celebrated 20 years in the role on May 25.
“I’ve never looked back, it’s an exceptional job and I feel privileged to be here,” she said.
“Every day is different and there have been many highlights over 20 years.”
Stevens had previously worked as a litigation lawyer and alternative dispute resolution specialist when she was appointed Insurance and Savings Ombudsman in 1998. “The ISO Scheme had 58 insurance participants in 1998, today the Insurance and Financial Services Ombudsman Scheme has well over 4000 from across the financial services sector.”
Three thousand people contact the IFSO Scheme each year with issues or complaints about insurance and financial services. Over the years, complaints have become more diverse and more complex.
“While we are seeing a greater breadth in complaints, our strength is the depth of knowledge and experience we offer our participants and their customers when resolving disputes,” Stevens said.
“We have provided a free, fair and independent service for 23 years. IFSO Scheme case managers have industry and legal experience, and we’re all trained in dispute resolution, which involves negotiation, conciliation and mediation. We bring parties together, we listen to both sides and we consider the law, the facts and the evidence as an independent and impartial third party.
“As cases have become more complex, we have had to be more flexible in our approach, working on managing expectations and agreeing outcomes to achieve fair and reasonable resolutions. Good communication is absolutely key.”
Stevens says 20 years on the job have given her a more resolute focus on both preventing and resolving complaints. “The flipside of complaints is they can create positive change. We learn from our own mistakes and we learn from the mistakes of others. We draw on our experience to inform the industry and consumers about issues that can be better managed or, ultimately, avoided. Our webinars and training give financial service providers the knowledge to improve their processes and avoid the sort of practice that can lead to customer complaints.”
TOP 10 general insurance issues
The IFSO Scheme investigates about 300 complaints and responds to approximately 3000 complaint inquiries each year (about 11 a day). Complaint enquiries are any question or issue raised with the IFSO Scheme, and they indicate the areas clients do not understand.
About 75% of all IFSO Scheme complaint enquiries, and 60% of investigated complaints, relate to fire and general Insurance. “Most of the work we do when we can’t find in favour of a consumer is to spend time explaining the policy. Many complaints we receive are based on a misunderstanding of what the policy covers and its limitations. The ideal situation is for consumer expectations and understanding to be at the right level at the beginning – before they make a claim. The best time to understand insurance is before you need it. This is where financial advisers and brokers have an important role to play.”
1. Settlement methods or options
2. Delays
3. Uninsured third party
4. Excess
5. Prima facie claim
6. Premiums
7. Proof of loss/ownership
8. Repair issues
9. Gradual damage
10. Agreed/market value
The role of financial advisers
The education role of financial advisers and brokers is critical, Stevens says. “You are the best person to help your clients help themselves. Many clients do not understand what their policy does or does not cover them for and what their obligations are at claim time. By encouraging your clients to understand the policy and the claims process, they can make more informed choices.”
It is common for clients to:
• Expect insurance to cover them for every unexpected loss
• Not understand the cover under a policy or how the claim process works
• Have limited understanding of what information they have to provide
• Have unrealistic expectations about what the insurer will pay for
“You can help set client expectations about the scope of their cover and the claims process. Our common issues data can help you to anticipate weak areas and proactively address them. This can prevent issues escalating into complaints, while demonstrating your value as a financial adviser.”
Common issues:
EXCESSES: “It’s not my fault”, multiple excesses
Ten per cent of general insurance enquiries are about insurance excesses – many clients don’t understand why they have to pay an excess. An issue IFSO often hears about is when someone is not at fault in a car accident, but still has to pay an excess. The other common issue is when people have to pay separate excesses for separate events. For example, a landlord makes a claim for different damage to the kitchen and the bedroom in his rental property. Commonly this is treated as two separate events, triggering two excesses.
Case Study
Eric* and a driver in another vehicle (on the other side of the road) reversed at the same time, and Eric’s vehicle was damaged. The other driver said Eric reversed into the door on the driver’s side of his vehicle. It was clear who was to blame for the accident. In order for the excess to be waived under the policy Eric must be “completely free of blame” for the accident. As there was no independent evidence available to assist in deciding what happened, the IFSO Scheme said the insurer was entitled to apply the excess to the claim.
You can help your clients by telling them:
• Excess is a form of self-insurance. It helps to avoid too many small claims, which would increase premiums for everyone.
• The amount of excess varies according to the type of insurance, and some policies will waive the excess in certain circumstances; for example, some vehicle policies don’t require an excess to be paid for a broken windscreen.
• Policies set out when excesses must be paid and how much it will be.
• There is sometimes the option to increase the excess payable as a way of decreasing premiums.
Gradual Damage - not covered
Six per cent of calls to the IFSO Scheme are about gradual damage. People make claims for damage that has developed slowly, or gradually, and they are surprised to learn it’s not covered.
Water damage is a recurring issue, especially when the damage is discovered suddenly, but has been happening over time. It might be the much loved and watered plant which has caused the carpet below to rot; or the rotten laundry floor which suddenly gives way, having been saturated by a leaking washing machine for months.
Case Study
Mark* made a claim to his insurer, because his rental property had been contaminated with methamphetamine. The insurer declined the claim, saying there was no evidence that the damage was “sudden” and it was more likely that the contamination had occurred gradually from March to September 2017. Mark believed the contamination was sudden, because the last inspection of the house hadn’t shown anything unusual. No one knew what had occurred at the house to cause the contamination. The IFSO Scheme said the insurer was entitled to decline the claim, because there was no evidence of “sudden” damage.
You can help your clients by telling them:
• Most house insurance policies will cover sudden and accidental damage, not gradual damage.
• It is not the discovery, but the cause, of damage that is considered for insurance cover.
• If you do discover a leak, take immediate steps to prevent further damage and notify your insurer.
Proof of loss – clients must provide evidence
Seven per cent of calls to the IFSO Scheme relate to declined claims, because the insured couldn’t prove their loss. With jewellery or items of special value, often a photo isn’t enough. Special jewellery should be valued before anything goes wrong and, if necessary, specified on the policy. The aftermath of natural disasters is a stressful time, but the IFSO Scheme has seen cases where people have cleaned up and later had to deal with a declined claim as they don’t have the evidence to prove their loss.
Case Study
Linda* discovered jewellery had been stolen from her home and the thefts had occurred on several occasions between August and September. The loss adjuster said there was no evidence of forcible entry, and no proof of ownership. Linda had claimed the jewellery had been stolen by her carer. There was no evidence to support this. The insurer said it was unable to accept the claim as Linda had not proven it was an “accidental loss”. The IFSO Scheme said there was no specific information that “physical loss” had occurred which would be covered by the policy.
You can help your clients by telling them:
• To make a claim you must prove your loss.
• This means proving: the damage was sudden or accidental; you owned the items; and the value of the items.
• These things must be proved before the insurer is required to consider your claim.
• Keep all receipts, valuations, and photographs of the things you own, particularly anything that is valuable or unusual.
• After disasters such as cyclones, earthquakes or floods, take photos or videos of the damage, and contact your insurer before throwing anything away.
