Insurance disputes

Why dispute resolution?

Just because you have had a claim rejected it does not necessarily mean that you have no further recourse. It is always possible to go to court, although this is often and expensive and risky venture. However, there are other dispute resolution mechanisms that you can try.

Alternative dispute resolution

This is where you attempt to find a solution to a dispute without (or before) resorting to court action. In general it is quicker and far less costly. If your solicitor recommends court action, ask them to explain the advantages of disputing your claim through the courts rather than first seeking help from one of the resolution schemes.

The schemes described below are part of the financial industries structure.

Advantages of dispute resolution

The big advantage of these schemes is that they are free, and you do not have to pay the costs of the insurer if you lose your case. If you go to court you will generally have to pay if you lose. You do not need a lawyer to use the schemes, but it is a good idea to get legal advice if the claim involves a large sum of money. Remember, you are still entitled to take legal action if you lose the case under the scheme.

Insurance Ombudsman Service

This was previously known as the Insurance Enquiries and Complaints (IEC). In November 2004 a new name for the scheme was adopted: the Insurance Ombudsman Service. It hears disputes about the refusal to pay a claim concerning these types of general insurance:

· home insurance;

· motor vehicle insurance;

· sickness and accident insurance;

· consumer credit insurance;

· travel insurance;

· personal property;

· pleasurecraft;

· residential strata title;

· medical indemnity insurance;

· some types of small business, domestic and other insurance.

Phone the Ombudsman on 1300 78 08 08 (toll free) for details.

Complaints

First tell the insurer and ask them to resolve your complaint. If you are not satisfied with the result you can ask that the dispute be referred to the insurer’s Internal Dispute Resolution (IDR) process (contact the Ombudsman if you are not sure which person to speak to at the insurer’s office). You must get a decision from the IDR within fifteen business days of making your request.

Ombudsman’s Procedure for Dispute Resolution

If you are not satisfied with the IDR decision you can call or write to the Ombudsman and ask for assistance. This must be done within 3 months of the IDR decision. The ombudsman will then send you a "Referral Notice" to complete and ask for details of the dispute.

A Case Manager will then look at the dispute and try to resolve it. Information will be sent to an independent decision-maker who will make a decision and provide reasons in writing for the decision.

Determinations

The Ombudsman will provide determinations in writing. If you want to accept it you must inform the Ombudsman within one month of the determination. The insurer must then comply with the determination within one month of your acceptance. The determination is not binding on you – get legal advice if you want to take it further.

Life insurance – Financial Industry Complaint Service (FICS)

The Financial Industry Complaint Service can hear disputes about life insurance, including certain income protection policies. The Service is an external complaints resolution scheme approved by the financial services regulator, the Australian Securities and Investments Commission.

Before you can seek the intervention of the FICS because your claim has been rejected you must have first sought a review from the insurer. Under the Rules the member has 45 days to reply to your complaint. The member may notify you that it requires up to 90 days. However, you must agree to this extension of time. You must supply FICS with an authority to proceed and a summary of the complaint.

There are “jurisdictional limits” for a claim i.e. the maximum dollar value that FICS can deal with.

Ring 1300 78 08 08 (cost of local call) for details.

FICS decision making

There will be an investigation into the complaint. This is the opportunity for the dispute to be settled or conciliated. If not the dispute may proceed to a hearing, which will decide if the claim should be paid or not.

If the complaint is not resolved to your satisfaction you can refer it to the Chief Executive Officer. Your file will be reviewed and the Chief Executive Officer can:

· order a conciliation conference between you and the member with a view to resolving the matter; or

· refer your case to an Adjudicator if the amount in dispute is less than $30,000 and of a non-complex nature; or

· refer your case to an independent Panel who will make a determination.

If the decision is not to order the payment of the claim, you can still go to court.

Brokers - Insurance Brokers Dispute Limited (IBDL)

The IBDL hears disputes between consumers and insurance brokers or financial service provider (other than an insurance company). Brokers must be members of the scheme in order to bring a dispute to the IBDF. There are strict restrictions that apply to this scheme unless the broker agrees to have the dispute heard.

IBD covers policies including insurance for:

· motor vehicle;

· home buildings and contents;

· sickness and accident;

· life;

· consumer credit;

· travel;

· personal;

· domestic property policies; and

· small business pak policies.

General Insurance Brokers’ Code of Practice

Participating general insurance brokers subscribe to the General Insurance Brokers’ Code of Practice. The Code outlines standards of good practice to be expected from your broker. They include: communicating with you promptly and clearly, representing you properly in arranging your insurances, and providing support should you need to make a claim.

A new revised Code came into effect on January 1, 2007.

Contact the IBDL on 1300 780 808 (toll free).

LAW FOR YOU

Read this: This fact sheet is intended to be general information about the law in Australia. It is not a substitute for legal or other professional advice. Lawscape Communications Pty Ltd, Fairfax Interactive Pty Ltd or MoneyManager does not accept responsibility for loss to any person, who either acts or does not act because of this fact sheet.

Last Updated – March 2007

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