A construction company used an insurance broker to arrange commercial insurance policies with their insurer. Between 2021 and 2022, the company made various claims against their insurance, including in June 2021 for damage to a crane, in September 2022 for a damaged laptop, and in November 2022 for damaged panels.
In April 2022, in between various claims, the company’s insurance was up for renewal, and the company decided to renew for only six months due to internal changes. The broker advised the company that they had to pay $40,000 in premiums before any of the claims could be processed, which the company paid.
The company complained to FSCL that it took between five to seven months for each of their claims to be processed, which they felt was an unfair and unreasonable delay.
Dispute
The construction company complained that their insurer had mishandled several of their insurance claims, resulting in the claims process being significantly and unnecessarily protracted. The company wanted compensation for the impacts associated with being unable to access the funds from the claim payouts. They also complained that they were required to pay the premiums before any of their claims would be considered.
The broker explained that there had been a misunderstanding about the period of insurance and the premiums payable, which resulted in the insurer not considering the claim earlier. The broker accepted that the company’s experience fell below their usual service standards.
Review
We found that the broker had not provided a plausible explanation for the delays in lodging the company’s claims. There couldn’t have been confusion about the timing of the premium payments because at least two of the claims had been lodged before the premiums became due. We found that the broker had breached their obligations to exercise care, due diligence and skill, and to give priority to their client’s interests, under sections 431L and 431K of the Financial Markets Conduct Act 2013. The broker also hadn’t communicated with the company in a timely, clear and effective manner as required under the Code of Professional Conduct for Financial Advice Services.
To resolve the complaint, we suggested that the broker pay interest on the claim amounts that had been delayed in payment totalling $1,145, and $3,000 compensation for the stress, delay, and inconvenience.
Resolution
Both the broker and the company accepted our recommendation, and the complaint was resolved.
Insights for brokers
Brokers should ensure that claims are lodged with insurers in a timely manner and are followed up diligently. This reduces the risk of consumers suffering unfair or unreasonable delays in the processing of their claims.
