It’s the best policy

Consumers don’t like insurance claims being knocked back, but it’s a twoway street, Sophie Elsworth reports

INSURANCE customers are being warned not to fudge their answers when they sign up to policies because it can backfire badly when they make a claim.

The Financial Ombudsman Service’s 2016-17 annual review released this month has seen a surge in Australians taking their insurers to task – they accepted almost 8100 disputes relating to domestic general insurance – an increase of 26 per cent on the previous year.

And frustrated consumers most commonly complained about comprehensive car insurance (33 per cent), home building cover (30 per cent) and travellers’ insurance (10 per cent).

In most instances the complaints related to having a claim knocked back or a dispute over the claim amount.

FOS’s lead ombudsman in general insurance, John Price, said the surge in unhappy customers was being driven by a number of factors including social media use and consumers infuriated by dealing with outsourced call centres.

“People can quickly obtain information (online) and they have a whole library of people who can provide a response of what they should do if there is a problem,” he said.

“There’s also an issue of claims handling being outsourced by insurance companies not only in Australia but overseas.

But Mr Price urged consumers to do everything possible to avoid running into problems with their insurer – which includes being open and honest from day one.

“Make sure you answer whatever the questions are put to you at the time of taking out the policy truthfully,’’ he said.

“Don’t fudge it, if you have made five claims in the past, don’t lie because you may find you are without insurance because of that whereas it would have been quite easy to go to another insurer and obtain that policy cover with that type of background.”

Circumstances where dishonesty can catch you out include failing to disclose preexisting conditions when taking out traveller’s insurance or claims made as a driver for comprehensive car insurance.

Insurance Council of Australia’s spokesman Campbell Fuller said complaints were often a result of people making claims that are not covered in their policy.

“You can’t make a claim on an insurance policy unless the insurance policy covers you for that particular risk and that’s actually a large source of complaints,’’ he said.

“Another source of complaints is where the claimant is making a claim for something that should have been preventable, for instance, travellers who leave their luggage unattended and the luggage is then stolen.”

He urged all consumers to be honest when signing on a policy and make sure they have evidence to show they own the item in the claim and that the incident did take place.

Rise High Financial Solutions director Marissa Schulze said it was normal to be afraid of the unknown.

“Many people have a fear of debt and this is often the main reason that holds them back from achieving their financial and lifestyle dreams,” she said.

“Taking on additional debt puts most people out of their comfort zone.”

Ms Schulze said people could control fear of investment debt by surrounding themselves with trusted advisers, being realistic about finances and future goals, protecting themselves with insurance, and weighing up fear of debt against their fear of not being able to retire as they want.

“Most Australians, if they carefully examined their financial position… would realise that they will either have to work much longer than they would like or accept a much lower quality of life in retirement.”

Wealth on Track principal Steve Greatrex said credit card debt was “uncool, but debt linked to an asset that’s growing over time is generally OK”.

Mr Greatrex said while many Australians were comfortable taking on debt to invest in real estate, “it’s quite different when you get into the share side of things”.