The Insurance Process

Table of Contents

Introduction

There are many types of insurance in Australia, from motor vehicle insurance, home and contents insurance, through to life, travel, health and business insurance. The concept is simple, millions of people pay premiums to insurance companies, and the insurance companies are supposed to pay back some of that money in the relatively rare situation where something happens.

Insurance is usually accepted as being necessary, conservative and a good investment. But the concept of insurance is flawed in a number of ways, including because insurance companies are almost exclusively run for profit and most have obligations to shareholders to maximise profits. Ultimately, this results in more claims being denied, including claims officers denying legitimate claims. We’ve even heard of people having their car stolen during surgery and being denied their claim.

Insurance in Australia

General insurance in Australia is worth $63 billion according to IBISWorld. Some of the big players include:

  • INSURANCE Australia Group (IAG) – NRMA Insurance, CGU, SGIO, SGIC, Swann Insurance, WFI and more.
  • Suncorp Group Limited – Suncorp insurance, AAMI, GIO, Bingle, APIA, Shannons, VERO and more.
  • Auto & General Insurance Company Ltd – Budget Direct, Dodo Insurance, Latitude and more.
  • QBE Insurance Group Limited
  • Hollard Insurance – Real Insurance, Guardian and more.
  • Youi Insurance
  • Allianz SE – Club Marine, 1Cover and more.
  • Royal Automobile Club of Queensland (RACQ)

There are many small insurance companies as well. Gibbs Wright Lawyers have experience with all of the large insurance companies and many of the smaller insurance companies in disputing a rejected claim. If you have an insurance dispute, Gibbs Wright Lawyers are here to help.

Types of Insurance

Personal Insurance

  • Home and Contents Insurance;
  • Comprehensive and Third Party Motor Vehicle Insurance;
  • Travel Insurance;
  • Lender’s Mortgage Insurance;
  • Landlord Insurance;
  • Tenants Insurance;
  • Income protection Insurance;
  • Personal injury and illness Insurance;
  • Life Insurance;
  • And more.

Business/Professional Insurance

  • Public liability;
  • Product liability;
  • Professional indemnity;
  • Management liability;
  • Farm Insurance;
  • Cyber Insurance;
  • Key person Insurance;
  • Business interruptions;
  • And more

Common Reasons Why Claims are Rejected

The four most common reasons that insurers give for rejecting claims are:

Non-Disclosure

You as the insured have a duty to disclose relevant information when you take out an insurance policy or when you renew the insurance policy. If you did not provide comprehensive or accurate information at the requisite time, then your insurer may be entitled to reject your claim.

Exclusion Clauses

Your insurer may claim that due to certain clauses in your policy, your loss, damage or injury will not be covered under a particular provision.

Fraud

If your insurer believes that you have acted or engaged fraudulently in some way, they may cite fraud as the reason for cancelling your claim.

Policy Cancellation

If your insurer cancelled your policy in the middle of the period of cover, this may be because of an additional piece of information provided by you that increased their risk to an unacceptable level.

Although the treatment of customers and methods for resolving disputes is clearly set out in the General Insurance Code of Practice, problems still arise. Insurers are expected to be fair, open and honest in all dealings and transactions with customers but that doesn’t necessarily mean that that always will be.  

There are obvious exclusions to different types of insurance policies (e.g. motor vehicle insurance policies) that are often overlooked:

  • The age and/or experience of the driver – some insurance policies only cover drivers that are over a certain age (e.g. drivers over 25 years);
  • If you have an accident and you are under the influence of drugs or alcohol;
  • If you have an accident and you are charged with certain offences, you may not be covered by the insurance policy;
  • If you fail to disclose certain information before taking out an insurance policy (e.g. you fail to disclose your traffic record), insurers may attempt to deny liability on the basis that they would not have covered you if you had disclosed this information prior to taking out the policy.

The Insurance Process

The insurance process for general insurance matters can generally be broken down into five distinct stages:

  • Stage 1 – The incident
  • Stage 2 – The Claims Process
  • Stage 3 – The Internal Review Process
  • Stage 4 – The External Review Process
  • Stage 5 – The Court Process

We discuss more about each stage below.

Stage 1 – The Incident

The incident relates to the insurable event. If you have home and contents insurance for example, an insurable event may be when your house floods, is damaged by fire, or a window is broken. In some cases, you may be obligated to take certain steps to ensure you are entitled to claim for insurance, including mitigating your loss.

Stage 2 – The Claims Process

The Claim Process relates to the first main step in recovering insurance relating to the insurable event. This primarily involves two main areas:

  1. New claims; and
  2. Existing claims where the problem has not been fixed properly by the insurance company (e.g. defects in the repair work).

We will primarily discuss the process of new claims in this article, even though protections exist for defective repairs.

The claims process is your first contact with your insurance company. Many times, people make their claim over the phone.

Before you make a claim, it is important that you:

  • Are calm;
  • Have a short chronology of events that have occurred;
  • Ensure that you exclude any irrelevant information; and
  • Only provide information that is directly relevant to your claim.

Almost all insurance companies will record each interaction you have with them, and they may use this against you. If you have said something that may be harmful, you should contact a lawyer to help you correct the record, or ideally, obtain a lawyer before contacting your insurance company (unless immediate or urgent reporting is required).  

The initial claims process is the first step for your insurance company to determine what claims could be denied.

If there is any prospect of the insurance company being able to deny your claim, an insurance company may start an investigation to support the decision to deny you, or simply deny you without conducting an investigation.

You may or may not know about the investigation, but it is usually evident through an extended delay of processing your claim. If an external investigator is appointed, the insurance company will usually let you know. These investigators are often highly trained (for example, ex-police detectives) and have the goal of finding reasons to deny your insurance claim.

Stage 3 – The Internal Review Process

It is a requirement by law that all insurance companies have an internal review process. An internal review process is usually only necessary if you are unsatisfied with the outcome of Stage 2 – usually, when your claim has been denied.

The internal review process is handled by an employee from the same insurance company. In larger companies such as Suncorp and AIG, this person is usually at head office which is often in a separate building to the original person handling your claim. Unfortunately, it is unusual for the insurance company to reverse a decision it has made unless it is clearly wrong.

The internal review process is often beneficial and sometimes necessary before continuing to stage 4 and 5.  

Stage 4 – The External Review Process

Previously, the Financial Ombudsman Service (FOS) dealt with the external review process, but it is now handled by the Australian Financial Complaints Authority (AFCA). AFCA is available to most individuals and many small businesses (less than 100 employees) for things such as general insurance products and life insurance. AFCA does not have jurisdiction to assess every matter.

AFCA may request that the insurance company try to resolve the matter with you directly. This is largely pointless as you would have already been through the Internal Review Process. AFCA will then try to facilitate negotiation and conciliation between the parties which in some cases can assist in reaching a compromised agreement.

The main benefit, in our view, comes towards the end of the process, in the preliminary assessment and the determination stage. The insurance company is usually bound by the decision of AFCA. That is to say, if AFCA say the insurance company needs to fix your car – the insurance company must fix your car.

You are not bound by a decision made by AFCA – this includes if AFCA say the insurance company does not need to cover you. If you do not accept the position of AFCA, you can continue to Stage 5.

Stage 5 – The Court Process

The court process is the last step in the process. The court process is usually similar to any other breach of contract claim in the courts except that there is legislation that governs insurance contracts (the Insurance Contracts Act). In essence, you have a contract with your insurance company, and you will be arguing that they have breached that contract by failing to indemnify you.  

The cost of the matter will normally indicate which court the matter will commence in. Usually matters will be commenced in the Magistrates Court (up to $150,000.00), District Court (up to $750,000.00) or Supreme Court (more than $750,000.00).

Should I get a Lawyer?

People engage us at different stages throughout the insurance process. Some of our clients engage us shortly after the incident occurs, when an investigator is appointed, or when they are first denied insurance.

We usually accept clients at any stage through the insurance process and can assist you as follows:

Stage 1: The Incident

Providing general advice, assist and advise you to mitigate your loss, and help you comply with your insurance contract.

Stage 2: The Claims Process

We can assist you in making your claim, including ensuring you gather appropriate evidence and helping to exclude irrelevant material.

Stage 3: The Internal Review Process

At this stage, we usually request all of the records you have with the insurance company, so we know largely what they know (including telephone recordings, policy documents and some internal documents). We review your claim and try to identify if a different decision should have been reached and provide written submissions to support your claim to try to have the insurance company agree to approve it.

Stage 4: The External Review Process

AFCA must take evidence into account. We usually write reasons as to why the insurance company’s position would be unsupported by a court of law, and try to have AFCA rule that the insurance company needs to pay you pursuant to the contract.

Stage 5: The Court Process

At this point, we need to refocus your matter on a breach of contract claim. We identify the relevant points in your insurance contract that provide the indemnity, state the applicable facts and draft court documents in support of the position that the insurance contract should indemnify you.

The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.
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