Managing challenging claims

  • Publications and reports

    30 November 2023

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The Insurance and Financial Services Ombudsman (IFSO) is the insurance sector’s main external dispute resolution service.  IFSO handles around double the complaint enquiries of Financial Services Complaints Ltd, its main competitor in the financial services external dispute resolution scheme market.  

In its 2023 Annual Report, IFSO reported a dramatic 45% increase in both complaint enquiries and complaints in the previous year. The majority of that increase resulted from the Auckland Anniversary weekend floods and Cyclone Gabrielle, which had an enormous impact on insureds across the North Island.  

IFSO put it this way:

The most common reasons consumers gave for contacting us were delays and customer service issues – not only about the weather event claims, but also business as usual insurance claims. Added to that, we have been contacted by many customers of Latitude Financial Services, following a debilitating cyber attack on their business.

We all hope that 2023 was an aberration given the extreme weather events. However, we think it likely that IFSO is going to remain busy and see an uptick in complaint enquiries over its historic average. As a general rule, complaints increase as people come under financial stress, which may well be the case in coming years given the state of the economy.

Another significant reason for the likely increase in claims is a recent change to IFSO’s terms of reference to increase its jurisdiction to $350,000. That aligns IFSO’s jurisdiction with that of FSCL and the District Court. This additional headroom gives IFSO the flexibility to deal with more substantial claims.

While IFSO is not bound by the legal rules of evidence or prior precedent, its published decision summaries show that it makes broadly understandable determinations. More importantly, it appears that IFSO provides sufficient assurance to complainants at the first point of enquiry that less than 1% of enquiries turn into formal complaints. In the 2023 reporting years, IFSO resolved 309 out of 327 formal complaints.

The added benefit, particularly when dealing with difficult claims, is that IFSO provides an independent ear for complainants. Many complainants have remarked positively on this aspect of the process. It stands to reason that IFSO’s involvement is likely to result in reduced complaints being progressed.

No doubt picking up on the above benefits, IFSO has collaborated with Massey University to develop a short course in Complaint Response and Management. The purpose of the course is to better equip recipients of complaints within businesses to respond and resolve those complaints without escalation. That can only be of benefit to participants.  

We see only upside for insurance industry participants in the above developments. They ought to reduce the number of escalated complaints and promote happier customers.