If you are fortunate, you may never have to make a claim against your insurance. However, when things do go wrong and you are involved in an unexpected accident, disaster or other loss that is covered by your insurance policy, you can make a claim with your insurer.
The policy you buy is a promise of assistance when things go wrong, provided you fall within the policy’s terms and conditions. You need to lodge a claim to activate the insurer’s response. If your claim is accepted (and almost all are), the insurer will fulfil the promise it made in the policy. This is commonly through repairing or replacing damaged property or items, covering legal fees, or through a payment.
General Insurers pay out an average of $135.9 million in claims to policyholders each working day. They only decline 3.6% of claims*. In 2017-18, insurers approved 3,361,016 claims from policyholders**.
About 6.9 per cent of home and contents policyholders and 15.7 per cent of motor vehicle policyholders lodged claims in the December quarter of 2018 ^.
* Code Governance Committee General Insurance In Australia Report (2016-17), p.20, Table 8. (https://www.fos.org.au/custom/files/docs/cgc-report-general-insurance-in-australia-201617.pdf)
^ *ISA data as at December 2018
What is a claim?
When you make a claim on an insurance policy, you are formally notifying the insurance company that you have suffered a loss or damage that you believe is covered by the policy and you are requesting action.
The insurer will review your claim and see if the event or circumstances are risks covered by the policy.
You will need to provide proof it is a genuine claim and the insurer will need to be certain the claim satisfies the terms and conditions of your insurance policy.
If your claim is accepted, the replacement or repair of your property or any payment by the insurer is called the benefit or payout.
The insurer will work out the value of the claim and provide the appropriate benefit specified in your insurance contract.
The claims process
Insurance companies try to make the claims process as smooth as possible, but the policyholder must go through a few steps in the claims process.
Steps in making your claim
If you are well prepared and organised, and you have all the information that the insurance company needs to see, making a claim is usually straightforward and quick.
The first thing you must do is contact your insurance company as soon as practical after the event happens, especially if the loss is due to theft or a serious accident.
You may choose to review the Product Disclosure Statement for your insurance policy to see if you have a valid claim and that the event is not on the list of exclusions for your policy. Your insurer will do this anyway once you lodge a claim
You can make your claim progress much more smoothly if you take an organised, step-by-step approach. The following guidelines will help you to make sure that you don’t overlook any of the important steps in the process.
Before you claim
Making a claim
Working through your claim
Finalising your claim
Claims handling standards
Though each insurance company has its own processes for handling claims, general insurance companies that are members of the Insurance Council of Australia are required to meet or exceed the standards for claims handling laid down in the General Insurance Code of Practice.
The Code describes how insurers must handle their customers, including the time it takes to handle and make decisions on claims. Compliance is monitored by the Australian Financial Complaints Authority.
Insurance companies are expected to promptly assess all of the claims that are made, and to pay out all claims that are covered by the wording in their policies.
Under the General Insurance Code of Practice, insurance companies promise to respond to your claim within 10 business days and tell you whether they will accept or deny your claim based on the information you have provided.
When you make a claim you will need to provide enough proof of your financial loss under the policy. This may include proof of ownership of claimed items, police or medical reports, and receipts or invoices.
If the insurance company needs more detailed information before making a decision, it will let you know what information it needs from you within 10 business days of receiving your claim.
The insurance company might decide to appoint a loss assessor, loss adjuster or an investigator to get more information. If so, the insurance company will give you an estimate of how long it will take to make a decision about your claim. It will also notify you within five business days of appointing that person and it will let you know, every 20 business days, about the progress of your claim.
If your claim is complex, the insurance company will negotiate with you to arrange a different timeframe for settling the claim.
You can have access to any information about you that was used by the insurance company to assess your claim, unless the company is investigating your claim. Insurance companies are not allowed to be unreasonable in denying your request for information and reports about your claim.
If a mistake is identified in dealing with your claim the insurance company promises to correct that information straight away.
If an insurance claim is denied, the company must provide written reasons for the decision to deny the claim and information about its complaints handling procedures.
If you ask for them, the insurance company will also supply you with copies of any reports from service providers that were used in assessing your claim.
The General Insurance Code of Practice addresses insurance company responses an event declared by the ICA to be a catastrophe because the companies may not be able to meet tight deadlines when a lot of people are making property claims at the same time. If you have a property claim resulting from a catastrophe and insurers have finalised your claim within one month after the catastrophe event causing your loss, you can request a review of your claim if you think the assessment of your loss was not complete or accurate, even though you may have signed a release. Insurers will give you 12 months from the date of finalisation of your claim to ask for a review of your claim.
Urgent financial need of benefits
If you are suffering from financial hardship because of the event that has caused the insurance claim, companies promise to fast track the assessment and also to make an advance payment for any urgent financial need.
What you should do
File your claim quickly
You should file your claim as soon as you have gathered the information you need.
By making a claim and getting a claim number, your insurer is made aware of your loss and can start assessing your claim. You can provide the relevant information later.
If you delay reporting your claim, your insurer may not pay for any additional loss or damage caused by your delay.
Some types of policies may also have time limits to lodge a claim so check your policy.
Stay on top of your premium payments
The cost of your premium along with the date it is due, is outlined in your certificate of insurance. You may pay your premium:
- In one lump sum annual payment, or
- By instalments
If you fall behind on your instalments or are late with an annual payment, be sure to make up the shortfall as soon as possible.
Your insurer may allow a grace period where it will extend cover so long as you pay by a certain date.
If you are unable to pay your premiums due to financial hardship, contact your insurance company to discuss this. Given the circumstances, you may be able to make arrangements to help ensure your policy remains current.
Some insurers, particularly for late annual payments, may recommence cover from the date they receive payment. If so, you will have no cover from the date your payment is due until the date you make the payment.
If you don’t pay your premium your cover may be cancelled. Generally if a payment is overdue your insurer can refuse to pay a claim if a payment is 14 days (or more) late and can automatically cancel your policy without notifying you if payment is a month (or more) late. This is provided you were informed of this by your insurer before you entered into your insurance contract.
If you are paying your premium by instalments make sure your nominated account has sufficient funds to meet each payment at each due date.
Speak to your insurer about temporary repairs
Talk to your insurer before you spend money on temporary repairs after an incident. Some repairs might be urgent and necessary – such as preventing water coming through a damaged roof – but don’t overspend.
Many insurers have preferred repairers and suppliers and can arrange appropriate emergency repairs for you.
Remember to keep receipts for any out-of-pocket expenses you incur.
The use of a claims advisor should be considered carefully and with full transparency, the same for any service or tradesperson. Claims advisors may not lead to better outcomes for customers than they could generate for themselves.
Before engaging a claims advisor the customer should ensure they understand the advisor’s fee structure and any commissions, in particular how this may influence the advice and services they provide, including the time taken to resolve a claim. The customer should inquire whether using the claims advisor might further delay a positive outcome. The customer should check the advisor has appropriate professional indemnity insurance and holds relevant building licences, and request to see proof.
Finally and most importantly, the customer should ensure the agreement with the claims advisor is clear regarding the services they will provide, including timelines and targets for having the claim settled.
Insurers will not usually pay a customer’s costs for the engagement of a claims advisor.