One year into his role as ASIC commissioner, Alan Kirkland has some words of warning for insurers
By Bernice Han
Insurers have their work cut out on the compliance front as the Australian Securities and Investments Commission signals its patience is wearing thin over lapses in the past few years.
ASIC recently examined insurers’ internal dispute handling mechanisms and reached an all-too-familiar conclusion: insurers are not doing enough to meet their regulatory obligations, to the detriment of consumers.
The Cause for Complaint report was released in December after two other key reviews in 2023 – one on the industry’s failure to honour pricing discount promises to retail customers, and the other on the industry’s weak claims handling practices.
ASIC commissioner Alan Kirkland (pictured top) tells Insurance News the three reports say much about the sector.
“The industry’s got a lot more to do. The range of issues ASIC has identified through our recent work, it spans the entire customer experience from pricing to claims handling and dispute resolution,” he says.
“There’s a need across the board for insurers to lift their standards of compliance and their commitment to treating their customers fairly.”
The regulator lists failures by insurers to deal fairly and in good faith with customers as one of its 2025 enforcement priorities, as it ramps up oversight of the sector.
“I think it’s wise for the industry in general to be afraid,” Mr Kirkland tells Insurance News. “If we see evidence of serious misconduct, we’re very willing to take serious enforcement action.”
Mr Kirkland says the regulator’s 2025 priorities send a “very clear signal to insurers that we are looking in our enforcement work at the obligations across the full customer journey.
“That includes whether they’re complying with their legal obligations in relation to their pricing practices or the way in which they describe policies, the way in which they handle claims and internal dispute resolution obligations.”
In some recent cases, the regulator has pursued action through the courts – with success.
QBE is the latest general insurer caught in the crosshairs. Last October, ASIC launched civil penalty proceedings in the Federal Court over allegedly broken discount promises; QBE has said it will work with the regulator on the matters raised.
The move follows similar actions against IAG and RACQ Insurance, resulting in penalties of $40 million and $10 million respectively.
Mr Kirkland says the decision to take QBE to court demonstrates ASIC’s resolve.
“It’s a very strong message that we’re taking enforcement action and we’re willing to seek significant penalties where we feel that insurers have been in breach of the law … We continue to have a close interest in any … situations where insurers have effectively misled their customers about the premiums they will pay.
“We’ve secured significant penalties and I think the industry needs to look really closely at ASIC’s track record of taking enforcement action, because we have been and continue to be very active.”
The industry would do well to pay heed to Mr Kirkland, who is no stranger to insurers or the broader financial services sector. He championed consumers’ financial rights for years and was chief executive of Choice for more than a decade before joining ASIC as commissioner in November 2023.
At Choice, he led the consumer advocacy group’s calls for stronger laws to deter corporate misconduct and better protections for financial product buyers.
Mr Kirkland, who recently completed the first year of his five-year ASIC term, says consumers start from a position of “disadvantage” when they engage with insurers, whether submitting a claim or making a complaint, because insurers know more about their products and the laws.
“We’re still not seeing consistent evidence that insurers are living up to their customers’ expectations.”
“There is information asymmetry … and it’s important that insurers understand that inherent power imbalance and communicate with their customers in ways they can understand. That’s why ASIC really focuses on understanding how insurers are complying with those laws in our work.”
The unequal relationship is what drives the regulator’s work, Mr Kirkland says.
“We’ve looked in particular at how insurers have responded to people experiencing vulnerability, because that recognises that power imbalance, and it’s important that insurers recognise that in the way they communicate with their customers.”
He says the regulator’s work is “really critical because insurance is a product that many Australians depend upon … when they’re at their most vulnerable”.
In its latest industry review, the regulator examined insurers’ procedures for supporting retail customers through the complaints process and whether they were in accordance with internal dispute resolution (IDR) rules that began in 2021.
The regulator pored through more than 1.4 million complaints with 11 general insurers that make up 86% of the market by premium.
And the verdict? Unacceptable. The review of home and motor dispute data from January 1 2022 to March 27 last year found a raft of shortcomings.
Insurers failed to identify one in six complaints, and one in eight IDR responses for rejected complaints did not meet mandatory content requirements.
One insurer, according to the review, missed nearly 50% of complaints, and three others overlooked 30%-40%.
Mr Kirkland says compliance with IDR obligations has been a key focus after the regulator’s 2023 claims handling review.
The claims review included examining 43% of claims from the floods that hit New South Wales and Queensland in February and March 2022. It uncovered weaknesses in key areas, including IDR processes.
“IDR has been on the agenda in almost every discussion we’ve had with the insurance industry for the past few years, and that’s partly because it was a theme that came out in our review of claims handling from the 2022 floods,” Mr Kirkland says.
“Our view is that if insurers were complying with IDR obligations much more effectively, then you would see fewer disputes moving through to AFCA.”
The Australian Financial Complaints Authority recorded a 50% rise in insurance disputes in 2022-23.
ASIC says many of these complaints could have been solved earlier by insurers through internal dispute processes.
“If complaints are resolved earlier … it’s good for insurers,” Mr Kirkland says. “It costs them less and allows them to allocate their resources to other areas.”
He says the ASIC reviews show the industry is not investing enough to support customers, especially after disasters. Underinvestment in areas such as claims handling and dispute resolution was exposed by the industry’s response to 2022’s record floods.
“ASIC has been clear that insurers need to see large weather events as business as usual. Insurers need to be equipped to respond to those events, as well as continuing to process the other claims that come in as part of business as usual.
“And there are signs from our work, and also the data we received from AFCA, that in some cases, when insurers shift resources to major events, the handling of other claims suffers, and that’s not acceptable either.”
He says while the regulator has a “constructive” relationship with the industry and insurers are “very willing to engage” with it, that is not enough.
“My message to the industry is you need to do better. We’re still not seeing consistent evidence that insurers are living up to their customers’ expectations and consistently complying with their legal obligations, and that continues to be an area of serious concern to ASIC.”
How consumer champion turned corporate cop
Alan Kirkland has been advocating for consumers for years. He led Legal Aid NSW as chief executive, worked as executive director of the NSW Council of Social Service and was chair of the National Legal Assistance Advisory Body.
He was also a panel member for the Ramsay review, which led to the creation of the Australian Financial Complaints Authority and Compensation Scheme of Last Resort.
Mr Kirkland’s lifelong “commitment to justice” took a different turn in 2023 when he left his role as chief executive of Choice to join the Australian Securities and Investments Commission.
He says the work he is doing now “aligns very much with the regulator’s consumer protection role. It is about ensuring that businesses comply with their obligations to their customers, and when things go wrong, that customers have got access to rights and redress.”
Mr Kirkland says his work helping consumers with flood claims while at Legal Aid gave him an understanding of “what can go wrong for customers when their claims aren’t handled effectively”.
“I’ve always had a commitment to justice … particularly for people who are disadvantaged,” he says. “It’s so important that their rights are upheld.”
