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Wednesday, 4 December 2002
Page: 7214


Senator Mark Bishop asked the Minister representing the Minister for Veterans' Affairs, upon notice, on 16 October 2002:

(1) How many house insurance policies has Defence Service Homes (DSH) held, by state, in each of the past 5 years.

(2) For each state: (a) how many claims have been: (i) received, and (ii) paid, in each of the past 5 years; and (b) what was their range and average value.

(3) Of the claims rejected, what were the reasons for rejection in each case.

(4) In how many cases has the advice of the claims assessor been rejected.

(5) In how many cases have alternative and additional assessments been made of individual claims.

(6) What appeal or review mechanism exists for rejected claimants.

(7) For each state: (a) how many cases of fraud have been investigated in each of the past 5 years; and (b) how many prosecutions have been pursued.

(8) (a) How are claims assessors engaged; and (b) what qualifications are required.

(9) For each state, how many claims assessors are currently used.

(10) For each state, how many assessments have been conducted by departmental staff in each of the past 5 years.

(11) If departmental claims assessments have been made, what qualifications are required of the assessors.

(12) What percentage return does the DSH profit represent on total insured value in each of the past 5 years.

(13) What benchmarking is undertaken with private sector insurance with respect to costs and margins.

(14) Has consideration ever been given to the outsourcing of the DSH insurance function; if so: (a) when; and (b) why was it not pursued.

(15) (a) How many: (i) staff, and (ii) contractors, are currently engaged by DSH on house insurance; and (b) what are the current estimated overheads for that function for the 2001-02 financial years.

(16) Has there been any fraud investigation into the activity and conduct of DSH staff members in the Brisbane office of the department; if so: (a) what were the findings; and (b) what action has been taken.


Senator Hill (Minister for Defence) —The Minister for Veterans' Affairs has provided the following answersto the honourable senator's question:

(1) The number of house insurance policies held by the Defence Service Homes by state for the past 5 years is as follows:

Year

NSW

QLD

VIC

WA

SA

TAS

2001-2002

34,239

25,638

24,066

11,235

10,381

2,930

2000-2001

35,927

26,074

25,172

11,800

10,485

3,169

1999-2000

37,659

26,504

26,175

12,221

10,590

3,301

1998-1999

39,287

27,055

27,258

12,915

11,649

3,474

1997-1998

40,741

27,367

28,492

13,525

12,814

3,607

Note: The Australian Capital Territory is included in New South Wales figures and the Northern Territory is included in Queensland figures.

(2) (a) and (b) The number of claims received and paid by state each of the past 5 years including their range and average value is as follows:

New South Wales

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

455

314

245

196

142

1,352

100-499

2,497

1,866

1,528

1,715

1,386

8,992

500-999

964

694

545

777

693

3,673

1000-4999

769

678

524

855

721

3,547

5000+

111

299

100

236

145

891

Total Claims paid

4,796

3,851

2,942

3,779

3,087

18,455

Total amount paid

4,827,479

8,239,325

4,057,925

5,674,386

6,338,578

29,137,693

Average paid per claim

1,007

2,140

1,379

1,502

2,053

1,579

Number of claims not paid

1,024

771

660

845

1,084

4,384

Total number of claims made

5,820

4,622

3,602

4,624

4,171

22,839

Note: The Australian Capital Territory is included in the New South Wales figures.

Victoria

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

476

402

317

210

145

1,550

100-499

1,613

1,540

1,427

1,400

1,178

7,158

500-999

463

416

476

511

426

2,292

1000-4999

327

277

269

301

242

1,416

5000+

32

32

31

38

25

158

Total Claims paid

2,911

2,667

2,520

2,460

2,016

12,574

Total amount paid

2,053,176

1,810,277

1,990,455

2,598,505

1,843,501

10,295,914

Average paid per claim

705

679

790

1,056

914

819

Number of claims not paid

504

451

443

471

766

2,635

Total number of claims made

3,415

3,118

2,963

2,931

2,782

15,209

Queensland

20/10/97-19/10/98

20/10/9-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

653

618

471

315

278

2,335

100-499

2,219

2,269

1,962

2,075

1,635

10,160

500-999

405

445

405

465

402

2,122

1000-4999

357

370

348

307

215

1,597

5000+

60

31

33

37

19

180

Total Claims paid

3,694

3,733

3,219

3,199

2,549

16,394

Total amount paid

2,637,824

2,147,906

1,975,993

1,717,833

2,225,800

10,705,356

Average paid per claim

714

575

614

537

873

653

Number of claims not paid

765

739

670

715

793

3,682

Total number of claims made

4,459

4,472

3,889

3,914

3,342

20,076

Note: The Northern Territory is included in the Queensland figures.

South Australia

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

284

216

184

152

117

953

100-499

1,077

825

799

702

509

3,912

500-999

245

220

210

208

174

1,057

1000-4999

149

110

172

171

134

736

5000+

17

12

13

11

10

63

Total Claims paid

1,772

1,383

1,378

1,244

944

6,721

Total amount paid

969,703

691,678

835,433

861,767

876,962

4,235,543

Average paid per claim

547

500

606

693

929

630

Number of claims not paid

276

241

219

173

265

1,174

Total number of claims made

2,048

1,624

1,597

1,417

1,209

7,895

Western Australia

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

456

386

273

160

146

1,421

100-499

1,771

1,936

1,667

1,315

1,361

8,050

500-999

491

576

529

451

607

2,654

1000-4999

199

243

234

265

255

1,196

5000+

17

51

22

12

14

116

Total Claims paid

2,934

3,192

2,725

2,203

2,383

13,437

Total amount paid

1,507,410

2,957,740

1,517,304

2,218,051

1,648,277

9,848,782

Average paid per claim

514

927

557

1,007

692

733

Number of claims not paid

441

501

381

369

1,063

2,755

Total number of claims made

3,375

3,693

3,106

2,572

3,446

16,192

Tasmania

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

170

163

120

79

59

591

100-499

297

246

228

201

171

1,143

500-999

43

53

52

45

52

245

1000-4999

22

17

25

19

26

109

5000+

5

-

2

1

4

12

Total Claims paid

537

479

427

345

312

2,100

Total amount paid

232,507

133,720

150,109

310,154

127,857

954,347

Average paid per claim

433

279

352

899

410

454

Number of claims not paid

105

114

118

123

157

617

Total number of claims made

642

593

545

468

469

2,717

Australia Total

20/10/97-19/10/98

20/10/98-19/10/99

20/10/99-19/10/00

20/10/00-19/10/01

20/10/01-19/10/02

Total

Amount Paid $

Number of Claims

0.01-99

2,494

2,099

1,610

1,112

887

8,202

100-499

9,474

8,682

7,611

7,408

6,240

39,415

500-999

2,611

2,404

2,217

2,457

2,354

12,043

1000-4999

1,823

1,695

1,572

1,918

1,593

8,601

5000+

242

425

201

335

217

1,420

Total Claims paid

16,644

15,305

13,211

13,230

11,291

69,681

Total amount paid

12,228,099

15,980,646

10,527,219

13,380,696

13,060,975

65,177,635

Average paid per claim

735

1,044

797

1,011

1,157

935

Number of claims not paid

3,115

2,817

2,491

2,696

4,128

15,247

Total number of claims made

19,759

18,122

15,702

15,926

15,419

84,928

(3) The reasons for being rejected vary from case to case. However, in all cases, claims are rejected if they are not covered by the insured perils as listed in the Statement of Conditions booklet every policyholder receives.

(4) and (5) The role of the assessor is to attend the site related to the claim and prepare a report on the circumstances of the loss. An assessor's report should only contain factual details of the event, which is then considered by the Defence Service Homes Insurance claims officer. On the basis that the assessor is not asked to give advice or make assumptions, there is no reason why an assessor's report should be rejected.

Detail on the range and nature of reports other than from the assessor are not recorded, however it would only be an unusual circumstance when an “alternative” assessment is requested for a claim. It is not unusual, however, in the event of a significant claim, for Defence Service Homes Insurance (DSHI) claim staff to request additional reports, as the circumstances of the event unfold. For example, DSHI claim staff may request the assessor to obtain Police reports, take Statements, supply further particulars of damage, etc once the initial cause of loss is known. It is the role of the claims officer in State Office to take into account the full range of issues surrounding the claim (assessor's report, other reports from police where relevant, client claims history, policy limits etc) in making a determination on the claim.

(6) At the same time the policyholder is formally advised that the claim is not accepted, he or she is advised of their rights to dispute the decision through the Internal Dispute Resolution (IDR) process, a process that is endorsed by the General Insurance Code of Conduct. The IDR involves the details of the claim, and the ensuing decision, being reconsidered by a nominated senior Defence Service Homes Insurance (DSHI) staff member. If, in the event that the policyholder is not satisfied with this outcome, he or she is able to take the matter to the Insurance Enquiries & Complaints Ltd (the IEC). The IEC is independent and will negotiate with all parties in an attempt to achieve a satisfactory resolution.

(7) (a) and (b) The Defence Service Homes Insurance (DSHI) has in place procedures to identify fraud claims. This process is undertaken on a monthly basis using recently resolved claims as a base. To date only one claim for fraud has been identified that emanated from the Queensland DSHI Office in 1998. This matter was finalised through a process of mediation involving a Queen's Counsel (rather than litigation).

(8) (a) and (b) Each State Defence Service Homes Insurance (DSHI) branch selects a panel of qualified assessors to act on behalf of DSHI. This is done by a select tender process, and reviewed every two years. Only those assessing companies that meet national accreditation standards are considered for the tender process. The procedure to appoint assessors to the panel is pursuant to the General Insurance Code of Conduct, which is monitored by the Insurance Enquiries & Complaints Ltd. The procedure ensures that selected assessors are properly and adequately qualified, determines the hourly rate/fees, sets up the standards by which the assessor must represent DSHI and includes key performance indicators by which DSHI staff are able to ensure the quality of the assessor's work.

(9) The number of claims assessors currently used by Defence Service Homes Insurance by State is as follows:

State

Number

New South Wales

14

Queensland

17

Victoria

4 external & 1 internal

Western Australia

10

South Australia

6

Tasmania

6

(10) Specific detail of the number of desktop assessments undertaken by Defence Service Homes Insurance claims staff is not kept. Claims staff follow prepared guidelines to ensure there is a proper balance between the use of an external assessor and the viability of an internal desktop assessment. For example in some claims (eg minor damage such as broken windows or glass) it does not make business or financial sense to instigate a full external assessment. Guidelines are provided to staff to cover such instances.

(11) With respect to desktop assessments, these are undertaken by qualified insurance/claims Defence Service Homes Insurance (DSHI) staff. Currently, there are no formal qualifications required by the Insurance industry. A qualified staff member refers to a senior staff member who is experienced and capable to undertake his or her duties within their job description, in an insurance environment. Appropriate DSHI Staff are Code compliant (pursuant to the General Insurance Code of Conduct) and by March 2004, all DSHI staff will be accredited in line with the requirements of the Financial Services Reform Act.

(12) The percentage return as it relates to profits and total sum insured is not a measure that provides any meaningful indicator of an insurance company's business. A more meaningful measure to look at profit as a percentage of premium income.

`Total premium income' is the sum of all payments by individual policy holders during the financial year. `Profit' figures in the following table represent the overall surplus after adding revenue receipts from all sources (including premiums, interest and agency commission) and deducting all expenses (including claims and administration expense).

Year

Total Premium Income$000

Profit$000

%

2002

21,942

5,026

22.9%

2001

22,100

2,651

12.0%

2000

24,008

3,985

16.6%

1999

25,305

2,963

11.7%

1998

26,052

5,105

19.6%

(13) Within each Defence Service Homes Insurance (DSHI) branch regular surveys of similar (local) insurance products are carried out by DSHI staff. In addition and on a national basis, DSHI participates in industry created benchmarking surveys. These are undertaken regularly by independent bodies such as Tillinghast-Towers Perrin and the Insurance Council of Australia (ICA).

(14) (a) and (b) A review was conducted in 1993 to canvass options for the future direction of Defence Service Homes Insurance, including outsourcing this function. This option was not pursued, as it was considered not to be financially advantageous.

(15) (a) (i) 54. (ii) 3. (b) $3.7m.

(16) (a) and (b) There has been one investigation of alleged fraud into the conduct of Defence Service Homes Insurance (DSHI) staff members in the Brisbane office. The Departmental National Fraud Control Unit (NFCU) and the Director of Commonwealth Public Prosecutions (DPP) Brisbane conducted investigations and no action was deemed necessary.