The Australian Securities and Investments Commission (ASIC) has called on general insurers to improve the oversight of third-party experts and ensure clearer communication with policyholders around cash settlements, following a follow-up review of home insurance claims practices.
ASIC assessed how seven insurers responded to recommendations in its 2023 report “Navigating the Storm: ASIC’s review of home insurance claims” (Report 768), particularly focusing on claims arising from the 2022 floods.
While insurers had taken steps to monitor builders and repairers, ASIC found that oversight of independent experts such as engineers and hydrologists remained inconsistent.
The regulator said that insurers often lacked structured processes to verify the accuracy or quality of reports prepared by independent experts.
In many cases, insurers relied on claims staff to detect inaccuracies, despite these employees not necessarily having the technical expertise required for such reviews.
ASIC Commissioner Alan Kirkland acknowledged improvements in oversight of builders, but noted that similar attention has not been applied to other third-party experts whose assessments underpin many claims decisions.
The review revealed that insurers generally did not revisit expert reports once a decision had been made, creating a risk that errors could go uncorrected and impact claim outcomes.
ASIC also raised concerns around how insurers explain the cash settlement process to customers.
Although a fact sheet outlining available settlement options is required by law, ASIC found that many insurers provided only minimal information. In particular, the right to request a review and how to initiate one were often poorly communicated.
Kirkland stated that insurers should present settlement options in plain language, rather than relying solely on product disclosure statements.
“Insurers by law must provide a cash settlement fact sheet, which outlines options for settlement to customers who have made a claim. Those options should be explained in terms the customer can understand, rather than pointing to complex product disclosure statements,” he said.
Some insurers were noted to have introduced support measures such as follow-up calls after settlements to check if customers were able to proceed with necessary repairs. However, these practices were not consistent across the industry.
ASIC’s review also looked into broader claims handling operations, including staffing levels, support for vulnerable customers, and internal audit processes.
The regulator acknowledged that while claims-handling staff numbers have increased, the rise in internal dispute resolution (IDR) and external dispute resolution (EDR) cases has outpaced those resourcing gains. Report 802, issued in late 2024, previously identified resourcing shortfalls as a contributing factor to failures in complaint handling.
Efforts to identify and support vulnerable consumers showed improvement, with most insurers enhancing training and introducing specialist teams.
However, ASIC observed that considerations around vulnerability were not always integrated into all aspects of claims, such as determining the suitability of a cash settlement.
Audits conducted by insurers focused mainly on random file sampling. ASIC said this approach limited the ability to detect systemic issues, particularly with complex claims or those involving vulnerable consumers. The commission suggested insurers explore the use of automated tools to strengthen compliance monitoring.
The insurers included in ASIC’s latest review were:
ASIC emphasised that improvements should not rely on future catastrophic events to prompt action.
“We expect all insurers to consider our findings and assess their claims handling programs against the better and poorer practices identified in our latest review, and not wait to be tested by another extreme weather event,” Kirkland said.
Enforcement remains on the table. In April, ASIC initiated proceedings against Hollard Insurance Partners for alleged breaches of its duty of utmost good faith in relation to a 2021 home claim that took over three years to resolve. The case predates ASIC’s follow-up review, but investigations into other flood-related claims are ongoing.
The Insurance Council of Australia (ICA) is working on a revised General Insurance Code of Practice, informed by recent regulatory findings and parliamentary inquiries.
While the new code is expected to be finalised in 2026, ASIC’s current guidance urges insurers not to delay addressing existing operational gaps.
Consumer groups including Financial Rights Legal Centre and Financial Counselling Australia have echoed ASIC’s concerns, highlighting the impact on vulnerable claimants and calling for faster reforms ahead of the new code’s rollout.
Consumer advocacy organisations have echoed ASIC’s findings, raising concerns about ongoing claim handling issues.
Drew MacRae of the Financial Rights Legal Centre said delays, insufficient communication, and poor treatment of vulnerable consumers remain common. He noted that the group continues to receive complaints about low-value cash offers, particularly for older claimants who may struggle to manage repairs themselves.
“Last week, consumer groups called on insurers to act now to lift their claims handling game following Insurance Council of Australia’s announcement that a strengthened Code of Practice is at least two years off. Unfortunately, ASIC’s findings do not evidence a sector stepping up to meet the moment. While there may be some improvements here and there, the overall picture is just not good enough. ASIC’s review should be a wake-up call for insurers who seem to be asleep at the wheel,” MacRae said.
Louise Hayes from Financial Counselling Australia said the support provided to disaster-affected communities remains inadequate, especially for individuals experiencing trauma and hardship.
“The financial counselling sector continues to support and advocate for disaster impacted residents years after the event itself, despite the commitment of the insurance industry to do better and improve their claims handling procedures. Almost without exception, these same residents are vulnerable. There has been a clear deficit in insurers recognising and understanding trauma after a disaster and the associated vulnerabilities to their customers,” she said.
Rose Bruce-Smith of Consumer Action Law Centre added that insurers are failing to inform customers of their rights, especially during key decision points.
“When insurers push cash settlements onto their customers, it also pushes immense risk onto someone trying to rebuild their life. It's disappointing to see, over and over, that customers are still not being fully informed of their rights at this crucial point in a claims journey,” she said.
