CALENDAR
OF EVENTSFriday, August 2
Balance of trade
Tuesday, August 6
RBA interest rate decision
Wednesday, August 14
NAB business confidence
Thursday, August 15
Westpac consumer
confidence
Thursday, August 16
Unemployment rate
Car insurers under fire
Watchdog wants to stop ‘harmful’ investigation tactics
R
egulator ASIC is warning
car insurers they can do
better when it comes to investi-
gating consumer claims.
An ASIC review of 1.6 million
car insurance claims in the
12 months to September 2017
and interviews with more than
50 consumers suggest insurers
are investigating claims in ways
that are causing “significant
consumer harm” and eroding
trust in the process.
According to consumers,
car insurers are putting them
through “harmful and unreason-
able” processes when investi-
gating claims.
The corporate watchdog
found that when insurers sus-
pect claims are fraudulent, the
investigation practices lead to
poor consumer outcomes.
While only a small proportion
of claims are investigated, more
than 70% of the investigated
claims are found to be valid andthen paid. This contrasts with
a small number of investigated
claims being declined due
to fraud (4%).
ASIC says consumers feel
they are being worn down by
a lengthy and confusing investi-
gation process. Reported
poor practices include:
* Interviews that feel like interro-
gations, with some investigators
suggesting that consumers had
fabricated their claim.
* Interviews in consumers’
homes, excessively long or
successive interviews, and
interviews without notice.
* Onerous, unexplained and
successive requests for a wide
range of documents including
criminal record checks, social
media histories, birth certifi-
cates, phone and text message
records, financial statements
for every bank and loan account,
and information about family
members and friends.* Inadequate extra support,
such as consumers with limited
English language skills not being
offered an interpreter.
While fraud is a serious issue
that insurers need to investigate,
lengthy investigations impose
additional costs that consumers
often have to wear. ASIC is call-
ing on the car insurance industry
to implement better standards,
improve communication to con-
sumers and review how claims
are selected for investigation.
ASIC commissioner Sean
Hughes says consumers
deserve a fair process for inves-
tigated claims. “Insurers must
live up to the promise to pay
on the policy where the claim
is a genuine one,” he says.
Consumers who are unhappy
with the way their claim is being
handled are encouraged to
contact their insurer’s internal
dispute resolution team.
Darren SnyderTHE BUZZ
ON MY MIND
Focus on the long-term prize
THIS MONTH
NEWS
&
VIEWS
I
nvestors focused on short-term
performance will be disappointed
with the performance of the
Australian shares long/short sector.
However, we believe it is very
difficult to produce superior investment outcomes
without periods of short-term underperformance.
To illustrate our contention, we ran a simulation
that invested $130 “long” in the 10 best-performing
Australian stocks over the five years between March
31, 2014 and March 31, 2019 and $30 “short” in the
bottom 10 performing stocks. This simulated
portfolio would have generated a return of 51.6%pa- smashing the index return of 7.4%pa.
Despite this excellent long-term result, the
simulated portfolio that we built with perfect
foresight still experienced several periods of capital
drawdown that were more severe than the index.
We believe that similarities can be drawn between
the performance of the Australian shares long/short
sector and that of a simulated portfolio. That is, while
we expect that the sector will produce highly
attractive returns over the long term, there will be
short periods when it will underperform. As such, we
emphasise our belief that investors must take a long-
term view when investing in actively managed funds.
Jacob Smart, investment analyst, Zenith
Investment Partners