The Fair Insurance Code was developed by the Insurance Council of New Zealand (ICNZ) and applies to all ICNZ members. It encourages good conduct and professionalism and describes how the relationship between insurers and their customers should work. The most recent version of the Fair Insurance Code came into effect on April 1, 2020.
In the following complaint, vibration from road works caused damage (cracking walls) to the insured’s home. While her house insurance claim was initially accepted, the insurer later reversed the decision and declined the claim. She complained.
The role of Insurance and Financial Services Ombudsman (IFSO) Scheme is to apply the Fair Insurance Code. As part of the complaint investigation, the IFSO scheme case manager considered what amounts to a breach, and a significant breach of the code.
In February 2017, the woman made a claim for cracking walls in her house caused by vibration from roadworks. In April 2017, the insurer accepted the claim. However, as the roadworks were ongoing, the insurer confirmed it would undertake temporary repairs, monitor the situation, and follow up with the construction company about its liability.
Temporary repairs were undertaken to the exterior cladding. However, the job was incomplete as the builder told the insurer he did not have access to a cherry picker, so could not seal the second floor. Ongoing monitoring of the cracking continued, with the insurer paying the costs for experts.
In February 2018, the insurer reversed its position. They informed the policyholder about the policy exclusion for costs or claims directly or indirectly related to vibration. She was also told recent expert evidence that suggested water egress into the house raised questions about whether it was a leaky home.
The insurer said it was now declining her claim based on the vibration exclusion. However, the insurer offered to continue to investigate
the claim on the basis of holding the road construction company responsible.
She made a complaint. As a member of ICNZ, the insurer needed to meet the standards in the Fair Insurance Code. During the complaint investigation, the IFSO Scheme found the insurer could rely on the vibration exclusion to decline the claim. However, the IFSO Scheme had serious concerns about the delays, and the lack of transparency and follow-up relating to incomplete repairs. These concerns amounted to a significant breach of the Fair Insurance Code.
After discussions with the IFSO Scheme, the insurer agreed it had significantly breached the code. The insurer provided a detailed apology and offered the insured an unconditional ex-gratia payment of $50,000 in recognition of customer service issues and Code breaches, and $5,000 towards hers legal fees. She accepted the offer and apology. The IFSO Scheme determined the significant breach was resolved.
IFSO and the code
When considering breaches of the Fair Insurance Code, the IFSO scheme’s dispute resolution process aims for resolution. If a significant breach of the code is found, IFSO can ask the insurer whether it wants to resolve the significant breach, giving it the opportunity to try to make it right with the customer, within its own internal process. If significant breaches remain unresolved, IFSO will refer these to the ICNZ Code Compliance Committee.
The ICNZ considers a significant breach of the code to be a material breach of any provision in the code – or a series of breaches of the code that, taken together, are material – with the potential to bring the insurance industry into disrepute.
In this case a signifcant breach was found due to the delays and poor process. In the words of the code, the claim had not been resolved quickly, fairly or transparently. The insurer was given the opporunity to resolve it.
What amounts to a resolved significant breach will vary case by case. However, if mistakes have been made, the best approach is to be open and to accept and acknowledge the mistakes and provide evidence that those mistakes will be remedied. This case is a good example of that acknowledgement.
The insurer provided a detailed apology, without reservation. The apology expressed sincere regret for unacceptable conduct. It accepted the significant breach of the code, and it accepted the claim was not dealt with in a timely, transparent, or fair manner. The insurer also accepted its claims process had caused the customer extra stress and offered to continue to deal with the claim on a without prejudice basis. It confirmed that, if the failure to undertake the repairs caused further damage, it would pay for that. The insurer also offered a $50,000 ex-gratia payment. The complainant accepted the offer and apology, IFSO determined the significant breach had been resolved.
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