Insurance Claims Services Blog

The insured in this case was Warren Thorley of Sydney, the insurer, GIO. Serious fire damage was sustained by the Thorley’s private house, their documented repair bill totalling $112,094. GIO would offer no more than $55,590. The matter was eventually taken to FOS under their previous name of Insurance Enquiries & Complaints (IE&C) who calculated that GIO should pay $102,726, which slightly lower amount the insured accepted. The IEC Determination No was 298.10.6708.

In view of the unnecessary delay in obtaining this final figure the insured was entitled to Interest for the period involved on the additional amount of $47,136 as laid down by the Insurance Contracts Act 1984, and Interest amounting to $6,706 had also been claimed in the submission to IE&C. The liability for Interest was quite clear.

IE&C wrote to GIO asking them the following:

“Mr & Mrs Thorley have also claimed interest on the total sum payable by your office to them. Is your company agreeable to paying any and what interest to the claimants?

In other words IE&C, who should have been directing and controlling GIO were actually asking them “would you like to pay interest?” It was as blatant as that. This was akin to a judge saying to a convicted accused “would you like to go to prison”.

Not surprisingly GIO replied to IE&C as follows:-

“The GIO have no desire to pay any interest on this claim”

When the final Determination was produced, it concluded by stating:

“The Panel does not propose to award interest on this sum”

The Panel Chairperson was Peter Hardham.

However the chickens finally came home to roost in this murky saga when the claim for Interest was taken to the NSW Fair Trading Tribunal, by which time the entitlement to Interest had risen to $7,782.70. Upon receipt of the insureds claim, but this time through the Fair Trading Tribunal, GIO agreed to settle the claimed amount immediately, writing to the insured and saying:

“GIO will meet payment of the amount of interest claimed by you in the sum of $7,782.70”

This about-turn by GIO was relayed to IE&C, requesting their comments but there was no response.

All of the above is documented. Was this impartial claims adjudication?

Although this is not mentioned anywhere in their Terms of Reference, on their website nor in any of their brochures publicising the service, the FOS General Insurance division demand total secrecy if they are to consider a complaint from a consumer; they require confidentiality to protect the identity of the insurer.

This is cause for serious alarm considering that the FOS was established solely to protect the interests of the consumer.  This requirement is only revealed when a consumer actually approaches FOS, only then are they told of the requirement of an undertaking saying:

“I shall not publish or disclose to any third party the Detrmination of the Service in a form that discloses the identity of the member without its prior written consent”

The word ‘member’ refers to an insurance company and that word itself questions the impartiality of FOS.  They should be adjudicating on the insurance industry from a totally independant standpoint and that they use the word ‘member’ indicates an unhealthy relationship that is pro-insurance industry but kept under wraps behind a veil of secrecy and a refusal to answer queries.  Two thousand years ago the Romans had a phrase for this – ‘Quis custodiet ipsos custodes’ – who will police the police?

The secrecy demand is carefully re-enforced again by FOS after a Determination is produced when the consumer is told:

“You are reminded of your agreement with us not to publish or disclose the Determination to any third party in a form that discloses the indentity of ABC  insurance without its prior written consent”

The reason for this is quite clear – the insurance companies – the very industry who’s activities FOS was established to control are in fact controlling the FOS – otherwise why the demand for secrecy?  They will not allow FOS to intervene without this protection and this is the reason why this requirement does not appear officially, anywhere, until an individual consumer requests help.  The tail is wagging the dog.  For comparison purposes we have asked the Financial Ombudsman Service in the UK whether they impose a similar secrecy requirement and we have been told that consumers there are quite free to reveal anything – so why not here?

The FOS appear to be acting outside their Terms of Reference and as such any undertaking is meaningless and can be ignored.  In the coming weeks we shall be examining a whole range of FOS Determinations and will be publishing full details and names of all parties involved.  Times are changing, the public are entitled to expect full transparency and to be able to scrutinise and consider each matter in an open fashion.