The crucial role of definitions in holding insurance companies accountable

ESTIMATED READING TIME: 3 MINUTES

Failed Promises

In the world of insurance, we pay our premiums for the promise of protection, but are often met with the harsh realities of denied claims, long drawn-out processes and appalling or non-existent communication. These delay-deny tactics seem to be getting more and more prevalent.

I listened to a recent podcast by investigative journalist Adele Ferguson, aired by ABC News, where she talks about the systemic issues within the insurance industry and emphasised the pivotal role definitions play in ensuring accountability and fairness. Yes, you read that correctly “definitions”.

Adele told the story of Allan Bush, a 74 year old man who was dying of cancer. Allan paid his premiums for more than 40 years without ever making a claim, until the 2022 floods destroyed his home. The insurer denied the majority of his claim, offering only $1k for a damaged pump and $10k for temporary accommodation. Alan had to resort to living in a caravan, while the insurer constantly delayed and denied his claims for over a year (all the while knowing he was dying of cancer). Alan then sought help from Financial Rights Legal Centre, a solicitor and his local council. After getting legal help, the insurer finally paid $500,000.

Rate Hikes, Huge Profits

CPI (consumer price index) reported that insurance premiums have increased on average 16% in the last 12 months, all the while insurance companies are making huge profits. IAG reported a 75% increase in profits; QBE doubled its profits and Suncorp profits were up more than 50%. We have a problem here. We shouldn’t have to wait more than a year or resort to litigation to get a claim paid.

Delay, Deny, Litigate

Alan's struggle is not uncommon. The modus operandi of many insurance companies—delay, deny, litigate, has been the experience of many customers. The treatment of customers who suffered from the 2022 floods led to a Parliamentary enquiry, which prompted an apology from Andrew Hall, CEO of the Insurance Council of Australia. However, apologies fall short when customers are faced with denials or coerced to accept unreasonably low settlement offers. This enquiry also found that customers were confronted by rude and aggressive behaviour by assessors accusing them of letting their houses fall into disrepair or outright accusing them of insurance fraud. Of course, this Parliamentary enquiry will result in a report and will supposedly result in change. But that’s yet to be seen.

Definitions and Transparency

So how do we fix this? Insurance policies are rife with specialised terminology, making them difficult to understand for the general consumer. Insurers capitalise on ambiguity within policy definitions to evade their obligations. Whether citing lack of maintenance or wear and tear to deny claims or making low-ball settlement offers, insurers exploit the fine print to their advantage.

In the podcast, Adele advocated the need for standardised definitions in policies. A standardised set of definitions would empower consumers to compare policies effectively across insurance providers. How do we define ‘normal’ wear and tear? What is considered ‘maintenance’ and how do we determine lack thereof? This transparency is essential. Too many exclusions are hidden in the fine print.

By demanding terminology in policies be defined clearly and consistently, insurers can be held accountable for their actions, we can strive towards a more equitable insurance landscape—one where definitions provide clarity rather than enable exploitation.

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