Challenging Insurance Claims in New Zealand: Your Rights and Options
In New Zealand, when an insurance claim is declined, policyholders have several options for disputing the decision. Understanding your rights and the potential costs and benefits of each option can help you make an informed decision about how to proceed.
1. Negotiation with the Insurance Company
What It Involves:
The first step in challenging a declined insurance claim is often to communicate directly with your insurance company. This could involve providing additional documentation, clarifying misunderstandings, or addressing any discrepancies in the claims process. If the issue is simple, such as a misunderstanding or missing information, negotiation may be the best option.
Costs:
Minimal to no cost if you are handling the matter yourself.
Professional fees if you choose to involve an expert as a lawyer or claims advocate (always recommended).
Benefits:
Quick resolution: If the issue is straightforward, negotiation can lead to a fast resolution.
It’s less formal, less adversarial, and often allows both parties to reach an amicable agreement without escalating the issue.
Considerations:
Your ability to negotiate successfully depends on the complexity of the issue and the insurance company's willingness to reconsider its decision.
It may not always be effective if the company is firm in its refusal.
2. Internal Dispute Resolution (IDR)
What It Involves:
Under the Financial Services Complaints (FSC) Code, all insurers in New Zealand are required to have an internal complaints process. If a claim is declined, you can ask the insurance company to review their decision through their internal dispute resolution procedure.
Costs:
No cost to the policyholder for using this process.
Professional fees if you choose to involve an expert as a lawyer or claims advocate (always recommended).
Benefits:
Free and formal: You are given an opportunity for the insurer to review their decision internally, which is usually a more structured process than informal negotiation.
Often faster than external options: IDR processes are typically faster than going to court or to an ombudsman.
Considerations:
While there’s no cost, this process relies on the insurer’s internal staff, which may or may not result in a favourable outcome.
If you're not satisfied with the outcome, you may need to pursue external options.
3. Financial Services Complaints Ltd (FSCL)
What It Involves:
The Financial Services Complaints Ltd (FSCL) provides an independent dispute resolution scheme. If the internal dispute resolution process doesn’t resolve your issue, you can take your complaint to FSCL. This organization can review disputes between insurance companies and policyholders and can make a determination.
Costs:
No cost to the consumer for using FSCL's services.
Professional fees if you choose to involve an expert as a lawyer or claims advocate (always recommended).
Benefits:
Independent review: FSCL offers an impartial third-party review of the insurer’s decision.
Expertise: FSCL staff are experts in insurance law and industry standards.
Binding decisions: If FSCL determines that the insurer was wrong, they can direct the insurer to pay compensation or resolve the issue.
Considerations:
While the service is free, FSCL decisions may take some time to process.
FSCL can only resolve disputes that fall within its remit and may not be able to intervene in every case.
4. The Insurance & Financial Services Ombudsman (IFSO)
What It Involves:
The Insurance & Financial Services Ombudsman provides an alternative to the court system for resolving disputes between consumers and insurance companies. The Ombudsman can investigate complaints related to insurance policy claims and recommend resolutions.
Costs:
Free of charge for policyholders.
Professional fees if you choose to involve an expert as a lawyer or claims advocate (always recommended).
Benefits:
Impartial, independent process: The IFSO acts as a neutral party in resolving disputes.
Binding resolutions: The Ombudsman’s decisions are binding on the insurer, although the policyholder can still take the matter to court if dissatisfied with the outcome.
Faster than court: The Ombudsman process is typically faster than litigation.
Considerations:
Similar to FSCL, IFSO's jurisdiction is limited to certain types of disputes, and not all insurance matters can be brought before the Ombudsman.
If the Ombudsman rules in your favour, the insurer may be required to provide compensation, but the policyholder will need to accept the decision or take further legal action.
5. Legal Action (Court Process)
What It Involves:
If all other avenues have been exhausted, legal action may be necessary. Policyholders can take their case to the District Court or, in some cases, the High Court. A lawyer specializing in insurance law will help you understand your options, prepare your case, and represent you in court.
Costs:
High costs: Legal fees can be significant, especially if the case involves a complex legal issue or goes to trial.
Court fees: There are also filing fees and other costs associated with taking legal action.
Benefits:
Final and enforceable decision: A court decision is legally binding and final.
Potential for significant compensation: If the court rules in your favour, you may be entitled to full compensation, including any losses caused by the insurer's wrongful decision.
Considerations:
Expensive and time-consuming: Court cases can take months or even years to resolve and involve substantial legal costs.
Emotional toll: The process can be stressful, particularly if it involves a large claim or significant financial losses.
Conclusion: What’s Right for You?
Each option has its own set of advantages and drawbacks, and the best course of action will depend on the specifics of your case, the complexity of your claim, and the desired outcome.
Negotiation may be best for straightforward claims or when you think the insurer may be open to reconsidering.
Internal Dispute Resolution is an easy, free option for formal review if negotiation doesn’t work.
FSCL and IFSO provide an impartial, free, and expert review when the internal processes fail.
Legal action is generally seen as a last resort. However, if you have failed to resolve the issue in either direct or IDR, or if it is sufficiently complex, legal action may be the best method of enforcing your rights.
Remember, when dealing with a declined insurance claim, it’s essential to gather all documentation, carefully read the terms of your insurance policy, and seek professional advice if needed. Taking the right approach can save you time, money, and frustration in the long run.
Why Should You Use a Lawyer for Your Insurance Claim?
Expertise: Insurance law can be complex. A lawyer’s in-depth knowledge ensures that your case is presented in the most favourable way possible. They understand the tactics insurers use and can anticipate their moves.
Better Results: Having a lawyer on your side typically results in better settlement outcomes. They can identify weaknesses in the insurer’s arguments and leverage their negotiating power to secure a higher settlement or a more favourable ruling.
Stress Relief: Handling a declined claim can be incredibly stressful. A lawyer can take the burden off your shoulders by handling legal complexities, negotiations, and paperwork on your behalf.
Peace of Mind: Knowing that a professional is advocating for you can help alleviate anxiety. Whether you’re negotiating a settlement or taking your case to court, your lawyer provides expert guidance at every step, ensuring that your rights are protected.
While there are various ways to challenge a declined insurance claim, working with an experienced insurance lawyer dramatically increases your chances of success. From the initial negotiation through to litigation, a lawyer ensures you have the best possible chance of securing a fair settlement, alleviating stress, and avoiding the overwhelming burden of navigating the process alone.
If your insurance claim has been declined, don’t hesitate to consult a professional. They can guide you through every stage and help you achieve the best possible outcome, whether through negotiation, dispute resolution, or court action.