The 2021 Review of the Australian Financial Complaints Authority (AFCA) was undertaken by the Government in response to a statutory requirement, which saw the Government receive 167 submissions. The review provided an opportunity for feedback on the operation of AFCA since its establishment in November 2018, and to consider whether further enhancements should be made to ensure the external dispute resolution scheme is appropriately calibrated and operating effectively.
VACC’s submission provides commentary into the effectiveness of AFCA’s processes for the identification and appropriate response to systemic issues arising from complaints in the general insurance motor vehicle industry and in relation to consumers who have been misled by intermediatory vehicle lease brokers, or credit financial institutions, in the lease agreement of a new motor vehicle from a franchise dealer.
Complaints are an important indicator of AFCA’s members’ ability to comply with the General Insurance Code of Practice (the Code) and meet its regulatory objectives. VACC members dealing with insurers are predominantly small motor repair businesses, who over time, have been placed under a glass ceiling by insurers. This glass ceiling relates to preferred repairer schemes, restricting consumer choice of repairer policies, dictating repair methods, quoting methods, repairer warranties, parts used for vehicle repairs, with the most concerning being dispute resolution opportunities and objectivity amongst the insurer’s Internal Dispute Resolution processes and fairness principles.
The role of the vehicle owner is at the heart of the relationship between motor repair businesses and insurers. This role has evolved over time, however, AFCA’s role and power to address systemic issues that arise from the aforementioned issues between the insurer and repairer is not well known. By identifying the recurring complaints AFCA receives lodged against insurers on a daily basis, AFCA can go some way to question the status quo and broad obligations that an insurer is expected to uphold in order to keep their Australian Financial Services (AFS) license.
Complaints are an important indicator of a motor vehicle insurer’s ability to comply with the Code and meet its objectives. Understanding the reasons for an ‘expression of dissatisfaction’ provides members of AFCA, and the Code, with important insights into their products, compliance frameworks and organisational approach. VACC acknowledges that The Code Governance Committee will continue to monitor complaints to better understand the reasons behind the complaints, as well as AFCA member responses.
In addition, a systemic issue facing consumers, and one that is becoming more problematic, relates to consumers who have been misled by intermediatory vehicle lease brokers in the lease of a new motor vehicle from a franchise car dealer. VACC makes commentary around this systemic issue under recommendation 14.
The Review makes 14 recommendations in total. Most of the recommendations focus on enhancements to AFCA’s transparency towards parties to a complaint, and improvements to decision making processes.
For the VACC’s full review, visit: https://vacc.com.au/About/Submissions.