11.3 What the case study showed

11.3.1 Misconduct

AAI accepted that it had contravened the General Insurance Code of Practice in four ways in the course of its dealings with the Healds.

First, AAI accepted that it had breached clause 7.2, which required it to conduct claims handling in an honest, fair, transparent and timely manner.[1] Second, it accepted that it had breached clause 7.13, which required AAI to keep the Healds informed about the progress of their claim at least every 20 business days.[2] Third, it accepted that it had breached clause 9.2, which required AAI to respond to catastrophes (as defined) in an efficient, professional and practical way.[3] Finally, it accepted that it had breached clause 10.5, which required it to make information available about the customer’s right to make an internal complaint and about its processes for handling complaints.[4]

The General Insurance Code of Practice is a recognised and widely adopted benchmark for conduct. It follows that each breach of the Code of Practice constituted misconduct within the meaning of the Commission’s Terms of Reference.

11.3.2 Conduct falling below community standards and expectations

AAI also acknowledged that too many people were involved in the Healds claim and complaint; that its failure to settle the matter promptly after the FOS determination caused delay and added to the strain on the Healds; that it could and should have moved more quickly to resolve the difference of opinion between the experts; and that it could and should have offered to fund the Healds to engage their own engineer earlier.[5] However AAI did not accept that those failings, alone or in combination, amounted to conduct that fell below community standards and expectations.[6]

When the totality of the circumstances is considered, AAI’s conduct is revealed to have been insufficiently compassionate something accepted by Mr Dransfield[7] and insufficiently diligent. The failure to act with appropriate compassion made the already difficult circumstances faced by the Healds worse. The lack of diligence prolonged their difficulties. AAI’s conduct in handling of the Healds claim did not meet community standards and expectations for those reasons.


11.3.3 Causes of the conduct

AAI’s conduct was largely attributable to its internal systems and processes for handling claims and disputes arising from those claims. A particularly significant factor was AAI’s team management model, which diffused responsibility for claims across a team of employees.[8] As a result, no one person had direct responsibility for or deep knowledge of the circumstances of the claim.[9] The difficulties caused by that system were made worse by the very high volume of claims being handled at that time.[10] An unusually large number of very significant weather events had occurred within a relatively short period of time and these events had caused many claims.[11]

Mr Dransfield accepted that AAI’s team management model failed the Healds.[12] Two of the systemic issues identified by FOS – failures to provide information to policyholders about IDR processes and delays in implementing the requirements of determinations and settlement agreements – demonstrated that AAI’s systems for handling disputes arising from claims were also inadequate in each of the ways identified by FOS.[13]


[1] Transcript, Gary Dransfield, 20 September 2018, 6372; see also AAI Ltd, Module 6 Case Study Submission, 1718 [47]–[48].

[2] Transcript, Gary Dransfield, 20 September 2018, 6372; see also AAI Ltd, Module 6 Case Study Submission, 18 [48].

[3] Transcript, Gary Dransfield, 20 September 2018, 6372; see also AAI Ltd, Module 6 Case Study Submission, 18 [48].

[4] AAI Ltd, Module 6 Case Study Submission, 18 [48].

[5] AAI Ltd, Module 6 Case Study Submission, 1819 [49]–[50].

[6] AAI Ltd, Module 6 Case Study Submission, 19 [52].

[7] Transcript, Gary Dransfield, 20 September 2018, 6343–4.

[8] Transcript, Gary Dransfield, 20 September 2018, 6344; Exhibit 6.386, 23 December 2015, Email between Pugliese and Others.

[9] Transcript, Bernadette Heald, 20 September 2018, 6344, 6252; Exhibit 6.386, 23 December 2015, Email between Pugliese and Others.

[10] AAI Ltd, Module 6 Case Study Submission, 19 [53].

[11] AAI Ltd, Module 6 Case Study Submission, 19 [53].

[12] Transcript, Gary Dransfield, 20 September 2018, 6344.

[13] See Exhibit 6.396, 20 December 2016, Letter FOS to AAI Limited; Exhibit 6.398, 6 February 2017, Letter FOS to AAI Limited; Exhibit 6.400, 20 September 2016, Letter FOS to AAI Limited.

514 thoughts on “11.3 What the case study showed”

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