AFCA inundated by complaints from flood-ravaged customers

AFCA insurance complaints floods

Independent external dispute resolution service, The Australian Financial Complaints Authority (AFCA), received more than 2,000 complaints from insurance customers affected by last year’s devastating floods in South-East Queensland and Northern NSW – four times the number of complaints received for the next most significant weather-related event.

The early 2022 floods, which caused an estimated $4.8 billion in property damage across Australia’s eastern seaboard states, resulted in the second-most number of complaints received by AFCA regarding an event, receiving more than four times the next most significant weather-related event – the South-East Coast storms of February 2020 – totalling 493 complaints.

Complainants were most aggrieved by claims handling delays, which accounted for 37 per cent of lodgements to AFCA in this category.

Denial of claims due to policy exclusions or conditions accounted for one in three complaints (33 per cent), while disputes over claim amount represented one in four complaints (26 per cent).

Around three-quarters of complaints (74 per cent) were in relation to home building insurance, followed by home contents (9 per cent) and landlord insurance (5 per cent).

While AFCA reports that around 40 per cent of recent flood complaints were resolved at the earliest stage of its process – at the “registration and referral” stage when a complaint is referred back to the firm to resolve – this falls considerably below the 51 per cent early resolution rate for all complaints made to AFCA between 2021-22.

About three-quarters of complaints (74 per cent) were closed by agreement or in favour of complainants.

General insurers have received a deluge of complaints over the 2022-23 financial year, with AFCA registering 17,163 general insurance complaints as of 23 February, compared with 10,417 at the same point in the 2021-22 year – a 65 per cent increase in complaints lodged against the sector.

AFCA chief ombudsman and chief executive David Locke said the dispute resolutions service was particularly concerned by the number of complaints due to delays by insurers.

“We understand that the scale of this event has put pressure on insurers but these sorts of complaints can often be avoided through good, regular communication with customers.

“We would also prefer to see insurers resolving many more complaints within their own dispute resolution process, rather than consumers having to take the extra step of coming to AFCA – prolonging the time they spend in limbo, unable to get on with their lives,” he said.

Over the past year, AFCA states, flood-affected policyholders secured $12.9 million ($6.6 million for NSW residents, and $6.1 million for Queensland residents) in compensation and refunds from insurers through its complaints resolutions process.