Created in 1960, the Association Internationale de Droit des Assurance (AIDA) is the peak international body for insurance law. The Australian chapter, the Australian Insurance Law Association (AILA), was created in 1983. In that year, DLA Piper Consultant, Michael Gill became AILA's first chairman. Fast-forward 30 years, and Michael is enjoying his third year as AIDA president. In this role, his focus has been on revitalising existing chapters, such as Hong Kong and Poland, and establishing new chapters, such as Bulgaria, Croatia and Cuba. His sights are set firmly on Asia, where chapters in India, Malaysia, China and Thailand are either forming or are under consideration.
On 30 November 2012, Michael presented a paper at the AIDA Budapest Colloquium. Numerous representatives from around the world presented on their nation's experience. Michael found he had a good story to tell about the Australian experience. Below is an edited excerpt from the paper he delivered, which was co-authored by DLA Piper's James Morse and Emma van den Bok.
THE AUSTRALIAN EXPERIENCE
In 1991, the General Insurance Enquiries and Complaints Scheme (GIECS) was established in response to a demonstrated need for an independent, national body that could provide help to consumers who had disputes with their general insurance providers. Insurance Enquiries and Complaints Ltd (IEC) was incorporated in December 1993 as part of this self-regulation mechanism.
In November 2004, GIECS combined with the IEC to create the Insurance Ombudsman Service Ltd (IOS). The change was primarily brought about to increase accessibility and awareness, as well as to improve service to the community and stakeholders.
Today, Australia has the Financial Ombudsman Service (FOS). This commenced on 1 July 2008 and was formed through the consolidation of three schemes: the Banking and Financial Services Ombudsman, the Financial Industry Complaints Service and the IOS.
The FOS now provides dispute resolution services for over 80% of all disputes which arise in relation to the provision of financial services in Australia.
While some disputes still fall outside of the FOS's jurisdiction, such as disputes concerning the level of a fee, premium charge or interest rate, the jurisdiction has increased and is likely to continue to do so over time. This is not only due to the fact that insurance claims and disputes have increased, but also because over time the industry has grown in confidence about the scheme.
Critically, the FOS operates on a "without prejudice" basis and is not bound by any legal rules of evidence. It proceeds with minimal formality and technicality.
When deciding a dispute and deciding whether a remedy should be provided, the FOS will do what it considers is "fair in all the circumstances", having regard to legal principles, applicable industry codes or guidance as to practice, good industry practice and any previous relevant decisions of the FOS or a predecessor scheme (although the FOS will not be bound by these).
A Determination is a final decision and is binding upon the insurer if the claimant accepts the Determination within 30 days of receiving it
It is not binding on the insured and is cost-free to the insured.
An insurer has extremely limited rights of appeal once the claimant accepts the Determination. However, a claimant who receives a Determination with which they are not content may commence court proceedings against the insurer in relation to that very same dispute.
It is therefore not surprising that there has been some criticism of the FOS, especially from insurers and particularly regarding its quasi-judicial nature.
Recently, in the judgment of Mickovski v Financial Ombudsman Service Limited & Anor  VSCA 185, the court acknowledged that, in the face of increasing privatisation of governmental functions, there is a need for the availability of judicial review in relation to a wider range of public and administrative functions.
A similar concern is that because the FOS is not bound by legal precedent and is required to take other considerations into account (such as fairness and good industry practice), this can lead to a dichotomy whereby the same or similar disputes will be determined differently, depending on whether they are determined by the FOS or a court. This has the potential to create a system that allow parties to a dispute, usually claimants, to "forum shop".
Such concerns include those of a pro bono manager and partner at a leading Australian law firm, who stated that "the ever-increasing push for [alternative dispute resolution] is part of a wider reduction in access to court for people in our pro bono client base. A two-tiered justice system is developing where disputes worth more money receive the benefit of the rigour of the court system and the disputes that our clients are involved in are accorded such rigour less and less".
But the question arises: is this inappropriate, or is it all just part of the cut and thrust of alternative dispute resolution?
There appears to be two distinct camps on this issue: one which believes that alternative dispute resolution processes should generally mirror that of the judicial system, and the other suggests that alternative dispute resolution processes should be encouraged to undertake innovative resolution activities that are separate and distinct to the judicial system.
The General Insurance Code of Practice binds all members of the Insurance Council of Australia and sets out the way in which consumers can expect an insurer to behave and the recourse that they may have in the event of a dispute.
But I do not find this at all surprising. The concept of "balancing the interests" of all participants in the insurance industry, which has been central to Australia's recent reforms (including those in relation to alternative dispute resolution) has universal appeal.
© DLA Piper
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