Aviation, 5 , <1% Builders Warranty,
514 , <1%
Business , 2,787 , 3% Commercial Motor,
485 , <1%
Commercial Other, 130 , <1%
Contractors All Risks, 71 , <1% Farm, 635 , 1% Industrial Special Risks, 295 , <1% Liability, 745 , 1% Accident &/or Sickness, 2,434 , 3% Consumer Credit, 3,171 , 3% Home - Building, 13,066 , 13%
Home - Building & Contents Combined,
32,167 , 33%
Home - Contents, 3,317 , 3% Personal & Domestic
Property, 5,833 , 6%
Personal Motor, 7,201 , 7%
When assessed against the 3,865,984 claims lodged during 2011 – 2012, the number of claims declined by Code Participants represented less than 3% of all claims lodged. In 2011 – 2012 Code Participants declined 97,118 claims in 2011 – 2012 compared with 66,296 in 2010 – 2011. Declined claims consisted of 5,667 commercial insurance claims, and 91,451 personal insurance claims.
While the number of claims remained relatively steady overall during 2011 – 2012, the number of declined claims therefore grew 46%.
The declined claims data includes data from new Code Participants and we also changed our categorisation of data which may have affected data for Home Building & Contents Combined.
Code Participants have reported that the increase in declined claims in this reporting period was not due to changes in underwriting or claims handling practices. They have advised us that some of the factors that may have contributed to the increase in declined claims consist of:
Improved data recording and reporting resulting in more complete data, and in some instances providing declined claims data for the first time. These improvements have influenced the data reported in 2011 – 2012 for Home and Personal Motor classes for example.
Withdrawn claims have been recorded by some Code Participants as declined claims. Some Code Participants recorded partially accepted claims as declined claims.
In our view, a declined claim is one where a Code Participant has made a decision to deny the claim and excludes partially accepted claims and withdrawn claims. While there are many reasons for the discontinuation or withdrawal of a claim, its defining feature is that the claim was withdrawn before a Code Participant could accept or deny it. We have relied on the definition of “withdrawn claim” used by ASIC in Report 245,Review of general insurance claims handling and internal dispute resolution procedure 40.
We encourage Code Participants to review their internal processes for collecting and reporting data about declined and withdrawn claims, to ensure the data is capable of differentiation. This will provide better insights into declined and withdrawn claims activity. As highlighted by ASIC in Report 245, the ability to differentiate data and subsequent analysis of that data, will assist Code Participants to identify emerging trends relevant to, for example, customer expectations about policy features; the scope of policy coverage; claims handling; and underwriting practices.
9.5.1 Declined Claims - Personal Classes
Table 7 below shows that the number of declined claims for personal insurance classes grew 53% between 2010 – 2011 and 2011 – 2012.
With the exception of Home Building and Home Contents all other classes experienced increases in the number of declined insurance claims.
40
ASIC Report 245: Review of general insurance claims handling and internal dispute resolution procedures, August 2011, page 20. We have highlighted further aspects of ASIC’s Report in Part 9.6.
Table 7: Personal Classes – Number of Declined Claims
Class No. of Declined Claims
in 2011-2012
No. of Declined Claims in 2010-2011
Variance across reporting periods
Accident &/or Sickness 2,434 1,764 38%
Consumer Credit 3,171 2,377 33%
Home Building1 13,066 13,443 -3%
Home Building & Contents Combined1 32,167 10,906 195%
Home Contents1 3,317 6,495 -49%
Personal & Domestic Property 5,833 4,755 23%
Personal Motor 7,201 4,350 66%
Travel 24,262 15,686 55%
Total 91,451 59,776 53%
1. Home Consisting of Home Building, Home Building & Contents Combined and Home
Contents Classes. 48,550 30,844 57%
Declined claims for Home classes: The combined data for all Home classes shows that the number of declined claims reported in 2011 -2012 increased 57%. Code Participants highlighted a number of factors which they believe may have contributed to the increase in the number of declined Home insurance claims, including:
A number of Code Participants improved their ability to provide data about declined claims. This included identification of declined claims data for particular types of Home
products for the first time.
Some claims arising from the Queensland flood events of December 2010 - January 2011 (CAT 105, 111, 112) were not declined until 2011 – 2012, due to the complexity of the investigations required to determine whether the damage and/or loss was due to flood. Several Code Participants advised that they had continued to receive claims due to these events until May 2012.41
The 2011 - 2012 extreme weather events resulted in some claims being declined because the damage was not due to an event covered by the policy.
Some Code Participants recorded data about withdrawn claims as declined claims. These Code Participants advised that Home claims were typically withdrawn by customers because the assessed value of the damage/loss claimed fell below the excess applicable to the claim.
Declined claims for Personal Motor: Although the number of policies and claims remained relatively steady for this class, declined claims increased 66% in 2011 - 2012. Code
41
Participants identified the following factors that may have influenced Personal Motor
declined claims data:
The inclusion of withdrawn claims data in declined claims data. Code Participants advised that customers withdrew Personal Motor claims for a variety of reasons, and typically because the assessed value of the damage/loss claimed fell below the applicable standard excess or special excess.
A number of Code Participants have enhanced their ability to provide more accurate data about declined claims for this reporting period.
Declined claims for Travel: The comparative data for Travel shows that the number of declined Travel claims increased 55% in 2011 – 2012. We note that there was a
corresponding 11% increase in policy numbers and a 31% increase in claim numbers during this period, which may explain some of the increase in declined claims for this class. Other factors cited by Code Participants which may have contributed to the increase included recording withdrawn claims as declined claims. Code Participants reported that some Travel
claims were withdrawn because they were made under the wrong part of the Travel policy. In these cases Code Participants assisted customers to resubmit claims under the correct section of the policy. Code Participants also reported that some customers withdrew claims because they no longer wished to pursue them.
9.5.2 Declined Claims - Commercial Classes
In 2011 – 2012 Code Participants declined 5,667 commercial claims, 13% down on 2010 – 2011 data, as seen below in Table 8. The number of declined commercial insurance claims varied extensively in 2011 – 2012, except for Industrial Special Risks. Code Participants have indicated that improved reporting capability has enabled more accurate data about declined commercial insurance claims to be provided in this reporting year.
Table 8: Commercial Classes – Number of Declined Claims
Class No. of Declined Claims
in 2011-2012
No. of Declined Claims in 2010-2011 Variance across reporting periods Aviation 5 10 -50% Builders Warranty 514 234 120% Business 2,787 3,591 -22% Commercial Motor 485 237 105% Commercial Other 130 610 -79%
Contractors All Risks 71 110 -35%
Farm 635 926 -31%
Industrial Special Risks 295 278 6%
Liability 745 524 42%
9.6 Withdrawn Claims
For the first time we requested Code Participants provide us with data about withdrawn claims across the classes of general insurance covered by the Code. For this purpose, we adopted the definition of “withdrawn claim” used by ASIC in its 2011 study into claims
handling and internal dispute resolution procedures of eight general insurers providing motor vehicle insurance products.42
In ASIC’s 2011 study, participating insurers reported a number of reasons for the withdrawal of claims, including the following: 43
The absence of a demand from the third party involved in the incident that led to the claim.
The customer decided to claim directly from the third party responsible for causing the incident.
The customer did not respond to the insurer’s enquiries about the claim or was unable to provide information required by the insurer to assess the claim.
The customer no longer wished to pursue the claim, for example because the amount being claimed was less than the excess applicable to the claim.
The claim was lodged incorrectly.
The claim was withdrawn by the customer after the insurer investigated the claim. Property reported stolen, which formed the basis of the claim, was fully recovered and
undamaged.
The policy did not cover the incident.
There was no policy in place at the time of the incident giving rise to the claim. A significant number of Code Participants were unable to provide withdrawn claims data, due to a lack of systems capability or because such data is not routinely collected. This affected 96 of the 151 Code Participants that provided data for this Report.
In relation to the 55 Code Participants that were able to provide us with data about withdrawn claims data:
Some were able to provide accurate withdrawn claim numbers, but could not report on the reasons for the withdrawal of claims due to systems limitations.
42
ASIC Report 245, page 20. 43 ASIC Report 245, pages 21 – 22.
A “withdrawn claim” is a claim that has been lodged with a Code Participant, but for various reasons has been discontinued before the Code Participant determines whether to accept or deny liability for the claim.
The term “withdrawn claim” covers claims which a Code Participant may have variously described for example as “withdrawn”, “cancelled”, “closed” or “discontinued”.
The withdrawal of a claim may have been initiated by either the customer or the Code Participant.
Some were able to provide withdrawn claims data for commercial insurance claims but did not have the ability to capture this data for personal insurance claims.
Some recorded withdrawn claims data but reported that the data was incomplete due to systems limitations.
We note that ASIC also encountered similar difficulties in the ability of general insurers to extract and report this type of data during ASIC’s 2011 study.44 Accordingly the withdrawn claims data is both limited and qualified by these factors and has not been used to adjust the number of claims lodged during 2011 - 2012.
We encourage all Code Participants to collect withdrawn claims data across all classes of business, and to examine the reasons that claims are withdrawn. The outcomes may contribute to improved consumer access to their general insurance products, and assist customers in lodging and progressing their claims. In addition, it may assist Code
Participants to ensure balance and fairness are maintained across decision making in claims handling and internal dispute resolution.
The withdrawn claims data is presented in Chart 4.