The Insurance & Financial Services Ombudsman has penalised an insurer for failing to abide by the Ombudsman’s scheme’s terms of reference.  An insured made a claim for earthquake damage to their driveway and this was being investigated by the insurer.  The insured made a number of complaints to the insurer about the decision to reject the claim but these complaints were not escalated to the internal dispute resolution process of the insurer.

Several months later the insurer advised the insured that it was still carrying out enquiries and would respond when those were completed.  However it took no further action and closed its file.  A year later the insured wrote to the insurer expressing concern about the delay, but received no satisfactory answer from the insurer.

The Insurance & Financial Services Ombudsman scheme requires insurers to ensure complaints are properly escalated to the complaints department and the insurer failed to do this.  It was penalised $3,000 for this breach.

The insurer was also a member of the Insurance Council of New Zealand and had agreed to be bound by the Fair Insurance Code.  This sets minimum standards, including dealing with formal complaints.  As the insurer had not properly dealt with the formal complaints, but instead had closed its file without responding, it was in breach of the code.  The insurer agreed to provide a detailed apology and to make a payment of a further $7,000 to the insured.  This was accepted by the insured as compensation for the breaches.

The insurer is undertaking further training for its staff on dealing with complaints.

Alan Knowsley
Insurance Lawyer Wellington