IFSO Scheme releases 2019 Annual Report

The IFSO Scheme Annual Report, released today, reveals a small increase in complaints (322, up from 320 the previous year) and a significant increase in complaint enquiries (3,805, up from 3,357 the previous year) in 2018-2019.

“The increase could signal greater awareness about our free and independent service,” says Insurance & Financial Services Ombudsman, Karen Stevens. “However, complaints continue to show that many people simply don’t understand the policy or the contract they’re signing up to. To prevent the common complaints we see every day, communication between financial service providers and their customers must improve.”

225 complaints (70% of the total) were about general insurance. This includes 91 complaints about house insurance, 54 travel, 46 vehicle, and 22 contents insurance. 80 complaints (25% of the total) were about health, life and disability insurance. 12 complaints were about credit contracts, and 3 complaints were about financial advisers.

The most common complaint issues were: policy exclusions, scope of cover, non-disclosure, pre-existing conditions and gradual damage. “Insurance does not cover all things at all times. The best time to understand your cover is before you might need it,” says Karen.

Our top insurance tips for consumers are:
1. Check your policy and be clear about what it does and doesn’t cover
2. Ask about exclusions and limitations
3. Find out what you need to do to make a claim
4. Tell all and tell the truth
5. Be sensible and take care.

“This week’s Money Week theme is Now we’re talking, and across the board we encourage consumers to speak up and ask questions until they understand. Making informed decisions leads to better consumer outcomes. However, when a consumer is not satisfied with a financial product or service, it is their fundamental right to complain,” says Karen.

“The financial sector has been given the strong message to improve conduct and culture. A good step is understanding what can be identified and learnt from complaints.”

“24 years of IFSO Scheme complaints has created a wealth of information about how and when things go wrong. These insights can help industry understand the issues, engage with their customers, and get it right.”

See the Annual Report
Complaint examples as highlighted in the Annual Report 2018-2019

House insurance: exclusion
Check your policy for the limitations and exclusions. Insurance won’t cover all losses.
Viv* kept her home in pristine condition. One day, her full cup of Nespresso coffee “flew” off the table, staining a patch of the dining room carpet. Her house insurer agreed to replace the dining and living room carpet, as the area was open plan. But Viv also wanted the lounge carpet replaced. The insurer said no. The lounge carpet wasn’t damaged, and the policy had a loss of match exclusion; there was no cover if items weren’t able to be matched. But Viv said the insurer should replace most of the carpet in the house, because the house was open plan and because the policy wording was unclear. The IFSO Scheme found the loss of match exclusion clearly applied to carpet in separate rooms. The dining and living rooms were separated from the lounge and the rest of the house by doors. The insurer was entitled to limit the claim to the damaged and adjoining areas.
Complaint not upheld.
See the full case study
Travel insurance: pre-existing condition
It’s unlikely travel insurance will cover pre-existing conditions, unless arrangements are made with your insurer.
Mae* took her daughter Eve* to Australia in August 2017 to see a nutritional expert about Eve’s food and health issues. On the last day of their 5-day trip, Eve collapsed at a restaurant, unable to breathe, and was taken to hospital. Mae made a travel insurance claim for $1,256, the cost of the ambulance ride. The insurer declined, as the claim arose from a pre-existing condition. Mae argued Eve was diagnosed with her metabolic disorder in October 2017, so it wasn’t a pre-existing condition in August. But Eve had a long history of doctor visits and hospital admissions for food allergies, psychiatric episodes, collapsing and hyperventilation. Mae argued the August incident was a “one-off” reaction but had no evidence. The insurer was entitled to decline the claim.
Complaint not upheld.
See the full case study
Credit contracts: Breach of Consumer Credit Contracts and Finance Act (CCCFA)
Under the CCCFA, lenders must ask for up-to-date information about a borrower’s ability to repay a loan.
When Bev* took out a $17,000 loan to buy a car, she also purchased payment waiver. Her partner also arranged a consolidation loan, with Bev making the payments. Later, after Bev agreed to be guarantor for her son’s $4,700 car loan, she was made redundant. Bev was told the payment waiver for her car loan did not include redundancy. Bev complained. The IFSO Scheme found the lender had not met its obligations under the CCCFA and the Responsible Lending Code to make reasonable enquiries that Bev could repay the loan, or act as guarantor, without suffering substantial hardship. The lender didn’t get up-to-date financial information. It relied on previous information, and only checked Bev’s contact and employer details. The lender also knew it was likely Bev would be made redundant. During the complaint investigation, Bev was diagnosed with a chronic illness and couldn’t work. The premium waiver applied and covered the instalments for her car loan. However, Bev was struggling to meet the consolidation loan payments, so the lender agreed to restructure the loan by extending the period, reducing the interest rate, and waiving the set-up fees. It also agreed to remove Bev as a guarantor for her son’s loan.
Complaint settled.
See the full case study

House insurance: Fair Insurance Code
Insurers bound by the Fair Insurance Code must provide agreed minimum standards of service to customers.
In February 2017, Kim* made a claim for cracking walls in her house caused by vibration from roadworks. In April 2017, the insurer accepted the claim and arranged for experts to assess the damage and undertake temporary repairs. In February 2018, the insurer told Kim it had declined the claim, based on an exclusion for loss caused by vibration. The insurer offered to continue to investigate the claim on the basis of holding the road construction company responsible. Members of the Insurance Council of New Zealand are bound by the Fair Insurance Code. While the IFSO Scheme found the insurer could rely on the vibration exclusion to decline the claim, it had significantly breached the Code. The IFSO Scheme had serious concerns about the delays, lack of transparency and follow-up relating to incomplete repairs. After discussions with the IFSO Scheme, the insurer agreed it had significantly breached the Code. The insurer provided a detailed apology and offered Kim an unconditional ex-gratia payment of $50,000 in recognition of customer service issues and Code breaches, and $5,000 towards Kim’s legal fees. Kim accepted the offer and apology. The IFSO Scheme determined the significant breach was resolved.
Complaint settled.
See the full case study

*Not real names

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