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How to win an insurance complaint and resolve a 3 rd party insurance debt. Denis Nelthorpe West Heidelberg Community Legal Service. Project Aim. Project Aims Propose a different process for dealing with insurance disputes

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how to win an insurance complaint and resolve a 3 rd party insurance debt

How to win an insurance complaint and resolve a 3rd party insurance debt

Denis Nelthorpe

West Heidelberg Community Legal Service

project aim
Project Aim
  • Project Aims
    • Propose a different process for dealing with insurance disputes
    • Improve lawyer’s capacity to resolve insurance disputes through IDR & IOS
    • Propose advocacy & a systemic solution for 3rd party debt
project history
Project history
  • Other aspects of the project
    • National Insurance Hotline (Consumer Credit Legal Centre )
      • See fact sheet: Insurance Contracts Act & Determinations
    • Australia wide project & project partners
approach for the day
Approach for the day
  • Session Aim
    • Participants will understand
      • How to use IDR & IOS to solve disputed claims and 3rd party debts
      • How to use Industry Code to resolve claims & write off debts
  • Materials
    • Powerpoint notes
    • Fact sheets
    • Case studies
key reference material
Key reference material
  • ASIC – Corporations Act
  • Insurance Industry Code of Practice (COP)
  • Insurance Ombudsman ‘Terms of Reference’ (TOR)
  • Insurance Contracts Act
    • See Fact Sheet: Insurance Contracts Act and IOS Determinations
regulation of idr ios
Regulation of IDR & IOS
  • Corporations Act 2001 S 912A
    • A mandatory obligation for all licensees
    • s912A(2) a dispute resolution system
        • Internal dispute resolution procedures, and
        • Membership of an approved (EDR) scheme
  • Corporate Governance
    • IOS - Independent Board of Directors
    • IOS – Reporting to ASIC
    • COP – Independent Code Compliance Committee
facts about idr ios
Facts about IDR & IOS

2,910,419 claims are made to insurers last year

Rejected & Disputed Claims

63,700 claims rejected

11,800 claims disputed at IDR

1870 claims disputed at IOS

Note massive slippage – includes your clients

Win / Loss Ratio

28% consumers win at IDR

36% consumers win at IOS

Court comparison

not again

Not Again!

Dealing with 3rd party debt

case study
Case study
  • John comes to the legal service
    • Read the case study and answer the following question:
    • What is the classic legal strategy for dealing with a matter like this?
3 rd party debt classic legal strategy
3rd party debt: classic legal strategy
  • Client with letter of demand
  • Respond to lawyer/debt collector
    • Deny liability
    • Argue Apportionment
  • Advise client is judgment proof
    • (No assets > $5000 & Centrelink income)
  • Consider case study: legal advice
3 rd party debt classic outcomes for clients
3rd party debt: classic outcomes for clients
  • Argy-bargy for months
  • Debt summons to client
  • Possible bankruptcy
  • If lucky – A write off
  • If unlucky - Matter disappears
    • Lawyer loses track
    • Client might borrow or bankrupt
  • What is your experience?
    • Bankruptcy
    • Write it off – the debt is waived
3 rd party debt new approach
3rd party debt: new approach
  • Advisors
    • Bypass lawyers and debt collectors
    • Go to Insurance company internal dispute resolution process (IDR)
    • Refer to Code – Financial Hardship
    • Ask IDR for write off – draft letter
    • If unsuccessful – CCLC Hotline or IOS Code complaint – draft letter
    • If still unsuccessful – CCLC or IOS intervention
      • Will only fix the code complaint with insurer
bypass the lawyer
Bypass the lawyer?
  • Is it a breach of professional ethics?
    • No – The Code requires referral to IDR
    • Lawyers are subject to the Code
    • Refer to Code of Practice
      • 3:10 refer to ASIC & ACCC guidelines
      • 3:11 Financial Hardship
      • 3:12 financial counsellors/ IDR
internal dispute resolution
Internal dispute resolution
  • Why would you be wary of referring a client to IDR?
facts about idr ios1
Facts about IDR & IOS
  • IDR is a specialist role within company
  • IDR statutory requirement
  • Amounts in dispute
    • 51% of disputes less than $5,000
    • 66% of disputes less than $10,000
      • Figures do not include 3rd party debt
  • If matter referred to IOS
    • Insurer pays - consumer free
3 rd party debt new approach outcomes
3rd party debt – new approach outcomes
  • Clearer process
  • Write off more likely
  • IDR/IOS avoids Courts & legal costs
  • Benefits for the client
    • Less worry
    • Client has closure as matter is finalised
  • Benefits for a lawyer / financial counsellor
    • More focused advocacy
    • Engaged in a process that will lead to systemic change
david v goliath

David v Goliath

Disputed claims

case study1
Case study
  • Susan comes to the legal service
    • Read the case study and answer the following question:
      • What would you do if a matter like this came into the service?
      • Would you expect the claim to be paid?
disputed claims current practice
Disputed claims – Current Practice
  • Lawyer/financial counsellor responses
    • Be outraged – wonder what to do?
    • Look for expert assistance
      • Legal aid/pro bono barrister
      • If unavailable –refer elsewhere
disputed claims classic legal outcomes
Disputed claims classic legal outcomes
  • Clients lose
    • Claims are not pursued in Court or ADR
    • Clients are out of pocket
    • Clients lose faith in insurance
  • Advisors lose
    • Clients are uninsured
    • Poor insurance practice not addressed
disputed claims what to do
Disputed claims – What to do?
  • Claim refused: get instructions on basis for refusal
    • See Fact Sheet: Insurance Contracts Act and IOS determination
  • Refer dispute direct to CCLC Hotline
  • Then refer to insurer’s IDR – See draft letter
    • Ring IOS or CCLC Hotline for IDR phone number and contact
    • See Fact Sheet: Insurance claims and dispute timelines
  • If no decision from insurer in 30 days refer to Hotline or IOS – See draft letters
benefits of new approach
Benefits of new approach
  • System is paper based
    • Submissions by lawyers
    • Appearances discouraged
  • Avoids a Court process
  • Cost free to consumer and advisor
  • Decision made in favour of the consumer is binding on the insurer
ios process for disputes
IOS process for disputes
  • IOS Process for dispute
    • TOR 8.1: Consumer Referral to IOS – 3 months
    • TOR 8.3: Insurer has 15 days to respond
    • TOR 8.3: insurer/ consumer exchange documents
    • IOS Benchmark: IOS to make decision – 3-4 months
    • IOS Benchmark: 95% resolved within 4 months
  • See IDR/IOS Timelines Handout & Draft letters of complaint
ios basis for decision
IOS basis for decision
  • Basis for decision – IOS TOR 11:13
    • Fair and reasonable
    • Good insurance practice
    • Terms of policy
    • Established legal principles
  • Exclusions: cross examination – testing of evidence
  • Outcomes – is it binding?
    • IOS is binding on insurers not consumers
    • Consumers retain the right to litigate
if the client thinks its unfair ios might too
If the client thinks its unfair IOS might too!
  • Utmost good faith - The Act
  • Good industry practice – The Code
  • Fair and reasonable - IOS TOR
  • IOS decisions are based on more than the law
insurance contracts act utmost good faith
Insurance Contracts Act – Utmost good faith
  • S13 Insurance Contracts Act 1984
    • A contract of insurance is based on the utmost good faith requiring each party to act towards the other party, with the utmost good faith.
  • The duty requires
    • insurers to act with due regard to the insured's interests in situations where there is a conflict of interest.
    • the insured to act honestly when dealing with the insurer
the code good insurance practice
The Code - good insurance practice

Code of Practice for claims

See Fact Sheet: Insurance claims and dispute timeline

Defines time to processes

Code 3.1: Accept or reject simple claims - 10 days

Code 3.3: Update on complex claims - every 20 days

Code 6.0: Claim refused – refer for IDR decision - 15 - 30 days

Code 6.9: IDR Unsuccessful – referral to IOS

All reference to days= business days

Illustrative case study – Customer service standards

Mary’s case

the law your client did something wrong
The law: Your client did something wrong

Just because your client has breached the Act or contract doesn’t mean the claim won’t succeed at IOS

Disclosure Requirements

Degree of Prejudice

fair reasonable ios tor
Fair & Reasonable – IOS TOR
  • In arriving at a determination a Panel, Referee or Adjudicator shall have regard to what is fair and reasonable in all the circumstances; regard must also be had to good insurance practice, the terms of the policy, and established legal principle.
  • Determination referral: 24746

“The Panel has focussed on what it believes is fair and reasonable in the circumstances and good industry practice.”

insurance contracts act disclosure
Insurance Contracts Act - Disclosure
  • Insured has a duty to disclose relevant information
    • S 21A – The insurer to ask specific questions of the insured;
    • S 22 The insurer to provide written warning about the consequences of non disclosure
    • Philip’s case
insurance contracts act breach of contract
Insurance Contracts Act – Breach of Contract
  • Consumer may challenge a rejected claim where:
    • A term or condition of the policy is breached
    • An alleged act or omission has occurred
    • BUT the Insurer has NOT suffered prejudice
  • Insurer’s decision is subject to:
    • S13 & S14 “utmost good faith”
    • S35 standard cover requirements
    • S37 requirements to notify insured of unusual policy conditions
    • S46 & 47 forgive pre existing defect, sickness or disability due to lack of knowledge
    • S54 Payment based on lack of prejudice to the insurer
  • Project Aim: Ensure that clients are given the best advice when dealing with an insurance dispute
  • Insurer’s IDR and IOS provide an under utilised avenue for consumers to appeal insurer decisions
  • Still not sure what to do? Ring:
    • CLCC HOTLINE 1300 66 34 64
    • IOS 1800 078 078