Daryl was selling his motorbike and let a prospective purchaser take it on a test-drive. However, the person drove off with the motorbike and did not come back.
Daryl reported the theft to the police, and his insurer. Daryl’s cover was only for storage of the motorbike because he did not have the correct licence to actually drive the motorbike.
Five months passed by, and the insurer had not made a decision on Daryl’s claim.
Daryl considered it was taking too long for the insurer to consider his claim, and wanted it to make a decision as soon as possible. In addition, Daryl was still paying insurance premiums when he no longer had the motorbike.
The insurer said that it needed to obtain a police report before it could make a claim decision. There was a delay in receiving the police report and this was the cause of the delay in the claim decision being made.
However, soon after, the insurer advised Daryl it had declined his claim. The insurer said it did not actually need to receive the police report to decide his claim. This was because Daryl had a storage policy, which only provided cover for theft of the motorbike if it was stolen from a locked building. Because the motorbike was not stolen from a locked building, there was never any cover for the claim and no requirement to obtain a police report.
The insurer also refunded Daryl some of his premium, covering the time after the motorbike was stolen.
Although Daryl accepted there was no cover for the motorbike, he complained to FSCL about the insurer’s delays in making a claim decision.
We reviewed all the claim correspondence between the insurer and Daryl. Although we agreed that the claim should be declined, we said the insurer unnecessarily delayed the claim process by taking nearly 5 months to make a decision.
Daryl’s initial claim form contained all the information the insurer needed to decline the claim. That is, the theft occurred in circumstances beyond what was covered in the policy. It was unnecessary to try and obtain a police report.
In addition, Daryl had been inconvenienced by having to:
- provide further information to the insurer, including screen shots of his communication with the thief/prospective purchaser
- request information from the police
- call the insurer 6 times for updates
- contact the insurer to lodge a complaint, and the insurer not acknowledging the complaint or initiating its internal complaints process
- then contact FSCL to get traction on the complaint.
We also said that by the insurer continuing to seek the police report, this gave Daryl false hope that his claim might be accepted when that was never a possibility.
Breach of the Fair Insurance Code 2016 (the Code)
The insurer had breached several sections of the Code:
- Clause 43 – the requirement to acknowledge a complaint within 5 working days.
- Clause 26 – the requirement to manage claims quickly, fairly, and transparently.
- Clause 30 – the requirement for insurers only to take into account relevant information when assessing claims.
In the circumstances we suggested the insurer pay Daryl $250 in compensation for the inconvenience it caused. Daryl accepted the offer and the complaint was resolved.
Key insights for insurers
There will always be claims that need to progress through to the next level of an insurer’s internal complaints process. However, the decision on Daryl’s claim could have been made very quickly. The insurer could have avoided the complaint altogether if it had more carefully assessed Daryl’s initial claim.