5. ASIC & Natural Disasters

Brisbane's wettest day in more than half a century is the heavy rains and winds from ex-tropical cyclone Alfred. Businesses and homes are completely under water and this is why. She joins us from her roof. We're not the only ones. There's lots of us. Floods, cyclones and storms have taken a terrible toll on parts of Australia over the past few years. Ruin, stock and furniture is being tipped onto the footpath. Homes are still inundated. Our flood victims have been through absolute hell. After recent devastating natural disasters in Australia, one thing's pretty clear. For many victims, the actual event is just the start of what can be a long and stressful battle to rebuild their life. Hi, I'm Gillian Bradford and welcome to this episode of Inside Assyk where we're going to get across some of the big issues with insurance. In just a little bit, we're going to dive into a report Assyk's just released about what insurers need to do to lift their game. But first up, I'm joined by Assyk Commissioner, Alan Kirkland. Alan, terrific to have you back with us. Great to be back on the show. Alan, I say have you back because you joined us for season one where we talked about people going through hardship and issues dealing with their bank. And I'll link to that in the episode notes. But today we're all about insurance and I want to ask you because you did work as a consumer advocate for a long time before you came to Assyk. What's your observation of the human impacts of this string of natural disasters? Look, my history with these disasters stretches back over a decade. During the really horrific floods that happened in 2010, 2011, people might remember they hit Southeast Queensland, particularly hard and Northern New South Wales. I was hitting up Legal Aid New South Wales, which has teams of lawyers that go out and help people in the immediate aftermath of these disasters. And I spent the next decade or so at choice advocating for better treatment for customers. And now at the Assyk end, really trying to regulate how insurers respond. And I guess the thing that really troubles me is that we're still seeing persistent problems with the way in which insurers respond. And that's in a context where these disasters are just getting worse. All the evidence says they're becoming more severe, more frequent. And that's why we need an industry that's even better prepared than ever to respond. Like you said, you've been watching this cycle on repeat for more than 15 years. Now, what are some of the key concerns of things which just keep going round and round for you with insurers? Well, there are problems at the front end with people not understanding what cover they have. So even though we have a common definition of flood now, there are other types of water damage, like rainwater runoff and storm damage that are covered in different ways, in different policies and have different definitions. And that can lead to a lot of confusion when people are even wondering whether they can make a claim. We see poor communication by insurers, not letting people know where their claim is up to or communicating ways that distressed people can understand. We see inadequate resourcing, so not having enough people to handle claims and to handle complaints. Insurers have been under a whole heap of scrutiny over the past few years, including significant political and public pressure over these latest weather events. I'm wondering where ASIC fits in here. There is certainly a lot going on and there's a big complex debate around the many issues affecting consumers trying to get access to insurance. Our role within that is very specific. So effectively, we regulate the claims that insurers make to consumers. So are they accurately describing the policies and marketing them in a fair way? And then we regulate the claims handling. So when somebody makes a claim, insurers are required to handle that efficiently, honestly and fairly. And so we can look at that. They're also required to treat their customers in good faith. And so that's when we can step in. If we see evidence that insurers are failing to handle those claims appropriately, we can go and do a surveillance like we've done in response to the 22 floods and go out publicly and talk about the problems that we've found. And in the more serious cases, we can take enforcement action in the courts. And Ellen, that's what I do what I understand because it does seem that ASIC is frustrated. Insurers have been slow to act to fix some of the issues you identified years ago. Is there action you're prepared to take if they don't get their house in order? We've got a series of investigations underway in relation to claims handling failures in recent years. And you should expect to see us take more serious action within the next year on some of those matters. And we've got a very strong track record of taking that sort of action against insurers. We've taken several major actions for insurers failing to live up to the pricing promises they've made to their customers. One of those resulted in the largest fire never given to a general insurer in Australia, which was a $40 million civil penalty. So that shows we're willing to take action, but also the courts are willing to impose significant penalties where insurers fail in their obligations to their customers. Ellen Kirkland, thank you so much. Thanks, Gillian. Well, next up, we're going to be taking a deeper dive into ASIC's latest report on home insurance. And I'm joined now by Nathan Bourne, Senior Executive Leader, Credit Banking and General Insurance at ASIC. Nathan, hello. Hello, Gillian. And Julia Davis, Senior Policy and Communications Officer at the Financial Rights Legal Centre. Hi, thanks for having me. Julia, let me start with you. What should people expect from their insurance company when they get hit by some sort of weather event? I mean, they should expect the company to come through with the promise that they thought was made when they bought that product. I mean, insurance is a promise. They're going to be there for you when you need the most. They have the expertise. They know what needs to happen after a disaster. They're going to come in, have some empathy, and tell you you can get rid of these wet moldy carpets. Don't worry, we've got you. We're going to put you in temporary accommodation. You know, if you need space for your dogs or you need space for your kids with disabilities, we'll find something that suits. Don't worry. And I want to hear now directly from some of the people hit by some recent events just to give a sense of their experience with insurance. Let's take a listen. If it was a storm, we're probably insured. If it's a flood, no. This was just devastation beyond belief. We had the same hydrologist on the same day and we have three different outcomes and it's very confusing. I don't understand any of it. After the 2022 floods, he was hit with a tenfold increase in his insurance premium. It went from $2,500 to $27,000. Julie, your reaction to some of those experiences? You know, unfortunately, those are the types of people that we talk to in my service. There are people from every walk of life who did not expect to be in this situation and now are very vulnerable. Everything that they thought they had was turned upside down. People might have bought that insurance 10 years ago and just kept hitting renew and haven't really looked at it closely since then. Maybe they've done a renovation and forgot to tell the insurer or maybe the insurer sent them a supplementary PDS that they never read. That's pretty standard consumer behavior. But unfortunately, after a storm, after a flood, after a disaster, it's too late to go back and read the fine print. You know, you either have the right cover or you don't. You either have enough cover or you don't. And it is really heartbreaking to talk to people who thought they'd done everything, thought they'd crossed all the T's and dotted all the I's, thought that all their direct debits were going through properly and then when they find out something's gone wrong, it's too late. Nathan, you've been tracking a number of our big home insurers for years now and you've conducted a review lately, well, a couple of reviews this year. What do they tell us? So our latest report is really looking at the programs of work that the insurers have been doing since the 2022 flood. So we came out with a whole range of recommendations from that work. Those floods also spurred a number of other reports from industry and even a parliamentary inquiry. So there's a big focus on insurers for the past year and it will continue into the next year. Our review tells us that insurers are doing a lot of work. They are improving their systems and their programs and how they treat customers, but it's really inconsistent. So what we're seeing is that some insurers seem to be doing quite well in their programs, but there are some that are really not anywhere near where they need to be. What's one of the biggest recurring issues for you? So we've had a lot of issues with communications between the insurers and the customers. It goes to some of the points on does the customer really know what they're insured for, but also when you put in a claim, if you've been the subject of a natural disaster, you're normally in a very vulnerable position and you need that communication on an ongoing basis. I think the insurers really failed in that regard to keep customers engaged, communicated with throughout the whole process and they just didn't have the systems to back that up. Julia, I saw you nodding a lot there. Yeah, absolutely. So I mean, I'll start by saying that we do understand that what we're asking of insurers after a major event is daunting. You know, we're asking them to provide tailored empathetic service to thousands, maybe hundreds of thousands of customers at the same time. But that's the job. That's the promise. You know, you made that promise to millions of customers and it is critical that you get it right because after a natural disaster, we know the consumers are experiencing significant ongoing trauma, family breakdown, mental health crises. This is a moment where they need their insurer to show up and get it right the first time. Nathan, what's been your message to the industry about how they should deliver on this promise? So our message to the industry has been about transparency but also giving information to clients and customers in a way that can be interpreted easily. It's in simple plain language terms, not using legal terms. And for example, if there's a complaint about a particular claim, don't refer them to page 62 of a PDS disabled. It's not necessarily in the policy or there's some kind of broad vague statement. That's where some of the issues arise. If we have good clear communication, not only at policy inception but at renewal times, that can go to what's driving the premium increases as well as what a wear and tear and maintenance type provisions in contracts. And what does that mean for a client? So transparency, simplicity, where possible, is very important. And we've been driving that message with insurers. I think that what that would do is reduce the amount of complaints. What sort of improvements should we be seeing right now from the sector? So what we should be seeing, and we've had a fairly benign year for 2024, we've just had some recent weather events, we expect that insurers are dealing with their customers better as a result of tropical cyclone Alfred, for example. We would expect it to translate through their better communication, better claims handling. They did a lot of preparatory work. There were phone calls going out to and messages going out to quarter of a million customers to make sure that they were aware of what their policies were, the sorts of support that insurers could provide. I think that's a great step and it shows the green shoots of the benefits of having these programs of work for them to provide better services for their customers. Julia, what's your observation? I know it's only anecdotal at this stage of how insurance companies have been dealing with their customers in the wake of these 2025 weather events. Like Nathan said, there are improvements. You know, we have not heard some of the shocking stories that we heard right after the 2022 floods, but the work we do has a really long tail. Legal advice around insurance disputes. You know, we sometimes get calls from people where the disaster was four years ago. For me, the thing that I hope to see dramatic change is in dealing with people experiencing vulnerability because, you know, often consumers who are older or disabled or, you know, are dealing with children with disabilities or are unwell, you know, they require considerable extra care. And unfortunately, we regularly see insurers failing to provide them with the care that they need. Julia Davis, Nathan Bourne, thank you so much for joining us today. Thank you. Happy to be here. Next up on Inside ASIC. Many of these people that we've spoken to are intelligent, educated people who would tell you they are not the type of people who would fall for scams. They'd never fall for a romance scam. They'd never buy a fake fixed income bond. They'd never buy cryptocurrency. What they were doing was following a protocol of reporting suspicious transactions to their banks and, as a result, losing, in many instances, $50,000 in a matter of moments. I'm Gillian Bradford and thanks for listening to Inside ASIC. Don't forget you can catch up with the latest episodes and all of last season, wherever you get your podcasts. Bye for now. (upbeat music)