Is the insurance industry's disputes resolution scheme just protecting its owners, wonders a Christchurch insurance claimant

by Cam Preston*

Originating in Sweden, the term Ombudsman literally means “grievance person” - a representative charged with investigating complaints fairly and independently.

The Insurance and Savings Ombudsman (ISO) Scheme was created in 1995.

It was setup as a self-regulating industry body, in response to a growing consumer rights movement - a movement which helped enact legislation such as the Consumer Guarantees 1993, and a movement that threatened to externally regulate the insurance and savings market unless providers did something themselves.

The ISO Scheme managed to successfully fend off regulation and stay a self regulating body until the "New Zealand Finance Crisis" which started in 2007.

In 2008 the Financial Service Providers (Registration and Dispute Resolutions Act) introduced the requirement for registered financial service providers to become members of a approved dispute resolution scheme, to try to restore confidence in the financial sector.

So in May 2010, the ISO Scheme was approved by the above Act, and officially became 'independent', just in time for the biggest event to hit the insurance industry in New Zealand, the Canterbury Earthquakes.

So lets examine their performance.

In their 2013 Annual Report you can't miss the glowing endorsements, such as "Very helpful in getting closure; very helpful; great communication" and “Was good having someone that could understand me and who I could understand over the phone.”

So lets look at the latest stats:

I find it a little difficult to reconcile the proportion of "Complaints Not Upheld" with the aforementioned glowing endorsements..

The ISO's financials show that they receive 100% of their funding from insurance companies and other private Financial Service Providers, over $2 mln last year.

The ISO also ensure that all complainants sign a confidentiality agreement before they look into their complaints.

Fair enough, but don't be surprised by the lack of publicity from complainants who are not happy - they are legally gagged.

Luckily the ISO Scheme has a Constitution which requires a independent review to be undertaken every five years.

The latest was undertaken in June 2013.

The 2013 Annual Report states "The Commission was pleased that the [June 2013] independent review found the ISO Scheme to be a competent, well-run EDR scheme that meets the six principles of accessibility, independence, fairness, accountability, efficiency and  effectiveness."

"Accessibility", according the to ISO, was the focus of their latest independent review.

A common misconception in Canterbury is that the Insurance and Savings Ombudsman can not only deal with claims that exceed $200,000.

In fact they can deal with claims where the amount in dispute is less than $200,000.

So if your claim is $500,000 and your insurer offers you $300,000, you can use the ISO Scheme to seek independent resolution.

Unfortunately this fact is not "accessible" to many people I have talked to in Canterbury.

It is still tucked away on page 6 of their "Terms of Reference":

So I asked the ISO Scheme for a copy of their latest independent report.

It was not available.

"The independent review will be available when the ISO Scheme Commission has considered it." came the response.

Apparently the ISO Scheme has a Commission which sits above it, I assume to keep an eye on things.

Their answer was somewhat strange considering the Ombudsman herself was already celebrating their independent review.

Interestingly the Insurance and Savings Ombudsman herself has been employed by the Scheme since May 1998, that's 15 years by my count, long before 'independence' in 2010.

Further digging uncovered details of previous ISO Annual Conferences, such as the one on 28 September 2004 sponsored by:

"AMI Insurance Limited, IAG New Zealand Limited, Fidelity Life Assurance Company Limited, Lumley General Insurance (N.Z.) Limited, American International Assurance Company (Bermuda) Limited, TOWER New Zealand and AMP Financial Services"

Or the conference in 2006 where they invited Dr Grant Lester, Psychiatrist to come over from Australia to talk about diagnosing "Querulent Litigants"

So we have a previously self regulating body, that became independent via the stroke of a politicians pen just before the largest insurance event in the history of New Zealand.

It is still 100% funded by the industry it seeks to protect consumers from, administered by staff who have been around for quite some time and policed by a Commission that hasn't got around to considering it's latest independent report.  

I am sure many of you will instantly diagnose me with Dr Lester's Querulent Litigants Disease.

And while I think it best that I take my medication quietly and shuffle off to bed, the only comfort I take is that I can do it independently.

Well ... at least that is what I will tell you.

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Cameron Preston is a Christchurch homeowner who has longstanding unresolved quake insurance claims.