What to Do When an Insurance Company Delays Payment

It’s a moment we all dread: you’ve suffered a loss, filed an insurance claim, and you’re counting on that much-needed support, only to be met with silence or endless delays. You’re not alone. Many New Zealand policyholders find themselves in this frustrating position, wondering what to do when an insurance company delays payment. In Aotearoa, having your claim stalled can add significant stress to an already difficult situation, whether it’s recovering from an accident, dealing with property damage, or managing health issues. But rest assured, you have rights, and there are clear steps you can take to move things forward.

Understanding Why Delays Happen

While frustrating, not all delays are malicious. Understanding the common reasons can help you address the issue more effectively.

Common Reasons for Insurance Claim Delays

• Complex Investigations: Some claims, especially those involving significant damage, personal injury, or liability, require extensive investigation, expert reports, and evidence gathering.
• Missing Information: Often, delays occur because the insurer needs more documentation from you, third parties (like medical providers or police), or assessors.
• High Volume of Claims: During natural disasters or widespread events, insurance companies can be swamped with claims, leading to processing backlogs.
• Internal Processes: Sometimes, it’s simply a matter of internal bureaucratic hurdles, communication breakdowns, or a change of claims handler.
• Disputed Liability or Coverage: The insurer might be questioning whether the event is covered by your policy or if you’re liable for the damage.

Your First Steps: Documentation and Communication

Proactivity and meticulous record-keeping are your best friends when dealing with a delayed insurance payment.

Keep Detailed Records

From the moment you file your claim, start a file. Document every interaction: the date, time, who you spoke to, what was discussed, and any reference numbers. Keep copies of all correspondence – emails, letters, and policy documents. This paper trail is invaluable if you need to escalate your complaint.

Follow Up Regularly and Politely

Don’t be afraid to chase up your claim, but always do so politely and professionally. Request an update on its status and ask for an estimated timeline for resolution. If you’re promised a call or an update by a certain date, and it doesn’t happen, follow up again.

Clarify the Reason for Delay

Crucially, ask the insurer for the specific reason for the delay, and request this in writing. This helps you understand what steps need to be taken, whether by you or by them. If the reason is missing information, provide it promptly. If it’s an internal process, ask what you can do to assist.

When Patience Wears Thin: Escalating Your Concern

If you’ve followed up multiple times and the delay persists without a satisfactory explanation, it’s time to escalate your complaint.

The Internal Complaints Process

Every licensed insurer in New Zealand must have an internal complaints resolution process. This is almost always the first formal step you need to take. Formally lodge a complaint with the insurer, stating clearly that you are dissatisfied with the delay and expect a resolution within a reasonable timeframe (usually 10-20 working days). They are legally obliged to investigate and respond.

External Dispute Resolution: IFSO or FSCL

If you’re not satisfied with the outcome of the insurer’s internal complaints process, or if they take too long to respond, you can take your complaint to an independent external dispute resolution scheme. In New Zealand, most insurers are members of either the Insurance & Financial Services Ombudsman Scheme (IFSO) or Financial Services Complaints Ltd (FSCL). These services are free for consumers and offer an independent review of your complaint. They can make binding decisions on insurers.

• IFSO Scheme: Deals with complaints about insurance and financial services.
• FSCL: Another independent scheme for financial service providers, including some insurers.

It’s important to check which scheme your insurer belongs to.

Your Rights Under New Zealand Law

Beyond these schemes, New Zealand consumer law offers additional protections. The Fair Trading Act 1986, for instance, protects consumers from misleading or deceptive conduct. The Contract and Commercial Law Act 2017 also outlines the obligations of parties to a contract, including your insurance policy. While pursuing action under these acts can be more complex, they underscore your rights to fair treatment.

Seeking Professional Legal Advice

For particularly complex cases, significant financial losses, or if you feel the insurer is acting in bad faith, engaging legal counsel can be invaluable. A lawyer specialising in insurance law can:

• Interpret complex policy wordings and explain your rights.
• Correspond with the insurer on your behalf, often carrying more weight.
• Help you prepare your case for IFSO/FSCL or, if necessary, take legal action through the courts.
• Identify if the insurer’s delay constitutes a breach of contract or an unreasonable refusal to pay.

Sometimes, the mere involvement of a legal professional can prompt an insurer to take your claim more seriously and expedite a resolution.

Dealing with a delayed insurance payment can be an incredibly stressful experience, but knowing your rights and the steps you can take empowers you to navigate the process effectively. From meticulous record-keeping and persistent communication to escalating through formal channels like IFSO or FSCL, there are clear paths to seeking a fair resolution. While many claims are resolved without external intervention, understanding when and how to seek further assistance is key to protecting your interests. If you’ve exhausted your options and are still struggling, remember that expert guidance can make all the difference in ensuring your insurance company honours its commitments.

If you find yourself in this situation and need assistance navigating the complexities, we’re here to help. Don’t let a delayed payment add to your burden. Submit an insurance dispute case today for a clearer path forward.