New ANZIIF course brings clarity to cash settlement obligation

Youi Senior Legal Counsel Gerard Patterson contributed his expertise to the latest ANZIIF short course on cash settlement standards for claims handling.

Patterson says one of the most challenging periods of his career in the insurance industry was working throughout the period of the Financial Services Royal Commission.

'When you look back however, sometimes those challenging times provide the most valuable insights and lessons ,’ he says. 'Subsequently, I have thoroughly enjoyed my recent role at Youi Insurance.'

Implementing the CSFS

Patterson has been part of Youi’s regulatory change project team tasked with putting into place the myriad of insurance legislative reforms that have flowed from the Royal Commission.  

An important part of the project involved the implementation of the Cash Settlement Fact Sheet (CSFS) for cash settlements.

‘Insurers generally look to rebuild, repair or replace insured items, however for various reasons, a cash settlement offer may be considered the best and most expedient available settlement option,' he says.   

‘In some circumstances the customer may themselves request a cash settlement.’ 

Concerns about cash settlements

However, concerns were expressed during the Royal Commission in relation to the negotiations of claims settlements and whether customers are suitably aware of the settlement options available to them. 

‘As a result, the CSFS has been introduced to ensure retail customers have sufficient information about the cash settlement offer,’ Patterson says. 

‘Ideally the CSFS will assist a customer to make an informed decision about whether to accept the offer.’

Understanding the options

In making a cash settlement offer an insurer must provide a CSFS to the customer, which sets out the other settlement options available under the Product Disclosure Statement (PDS).

The CSFS must also include a breakdown of the cash settlement offer, an outline of the customer’s rights of review regarding the settlement, together with a statement that they should consider obtaining legal or financial advice before accepting the offer.

'It’s important for customers to be aware that they won’t have the benefit of a guarantee on any repairs that an insurer will generally offer,' Patterson says. 

‘Further, in relation to building claims, if the customer takes the cash settlement, they will take on the responsibility for arranging and co-ordinating repairs and tradespeople themselves.

‘In particular, after natural disasters, there can be a greater demand for and a resulting shortage of available tradespeople.’     

Claims as a financial service

Patterson says the ANZIIF course will provide participants with an understanding of the introduction of claims handling as a financial service. 

'They will develop a high-level understanding of the Australian Financial Service Licence obligations, which includes the obligation to maintain a culture of efficiency, honesty and fairness in handling claims,' he says. 

'In addition, participants will gain knowledge of the cash settlement process and the requirement to provide a CSFS.

'The course will provide them with training to assist in claims roles and to understand the claims handling reforms with respect to cash settlement.'

A natural process

Born and educated in New Zealand, Patterson studied and graduated in law at Otago University before travelling overseas and ultimately settling in Australia to live and work.

'I was working in private practice as a lawyer in the area of commercial and insurance litigation when I became interested in working as an in-house lawyer,' he recalls. 'It seemed a natural move to work for a general insurer.

‘Once I was working in insurance, I thoroughly enjoyed it and I have stayed in the industry ever since. I’ve had the opportunity to work with some great mentors and wonderful people along the way.'

Well across the requirements

Patterson argues that insurers are all well across the requirements of regulatory change and the introduction of claims as a financial service under their licences.

'Insurers have all been working very diligently over the year to date, to implement the reforms,' he says.

Part of that has been the development and implementation of the CSFS, which must be provided to the customer on relevant cash settlement offers, from 1 January 2022.

Alongside the development and implementation of the CSFS, insurers are also obligated to train claims employees and representatives with respect to the provision of the CSFS in the required circumstances.

'Insurers are required to train their employees and representatives to ensure that they are competent in the claims handling as a financial service requirements,' Patterson says.

'This ANZIIF short course is a good place to start.'