Wild weather insurance claims handled poorly, say experts

Woman and child sitting on lawn after home insurance claim.

A new report from Financial Rights Legal Centre has found many insurance customers aren’t being properly supported when making a claim for property damage due to extreme weather events. 

Financial Rights Legal Centre chief executive Karen Cox said over the past 18 months there have been an extraordinary number of more severe and damaging weather events.

“When catastrophe strikes, people need help on a number of fronts including dealing with their [insurance provider]. In this fraught and traumatic environment, disputes are inevitable,” she said.

The centre’s report assessed experiences of more than 700 clients seeking assistance after making insurance inquiries related to extreme weather events between November 2019 and April 2021. Approximately 70% of these clients  inquired about home and contents insurance, while 45% asked for support for car insurance claims related to hail damage.

What are the most common insurance complaints after an extreme weather event?

The report identified five prominent issues insurance customers face when trying to make insurance claims after extreme weather events. 

  1. Poor claims handling: This includes delayed and confusing communications, perceived bullying by claims managers, and errors in the claims process. Around 20% of the centre’s clients faced these problems.
  2. Cash settlement offers: While a cash pay-out isn’t necessarily a problem, many found insurance companies offered inadequate sums to rebuild homes, or that offers were made to vulnerable people unable to manage repairs with ease. Almost 16% of people reported these experiences.
  3. Over-reliance on defect clauses: This is where insurance providers deny a claim on the basis that damage was caused by some kind of fault in construction or design of a home, instead of the damaging event. These issues accounted for just under 9% of the centre’s client experiences.
  4. Underinsurance: If people don’t insure their home, property or car to the appropriate value, then an insurance claim may not cover full repair or replacement costs. Almost 8% of people reported having insufficient cover or no cover for the specific events which affected them like flooding. This was the most common issue reported by people affected by bushfires (18.3%).
  5. Maintenance issues: Around 6.7% of experiences were about claims being denied based on the assertion that buildings weren’t properly maintained. This was despite the fact damages couldn’t have been prevented with any amount of maintenance due to the severity of the weather events. 

Considering these problems, Cox said insurance companies “should be better assisting people to identify the appropriate sum insured, and basing cash settlement offers on the likely cost to the customer rather than the insurer.” 

The Financial Rights Legal Centre is encouraging targeted government subsidies to assist with insurance premium payments for Australians in high risk areas.

“With extreme weather events increasing in both frequency and intensity due to climate change, national leadership is required to address these pressing issues,” Cox said.

If you’re worried about being caught out at claim time, read up on what isn’t covered by home insurance and common car insurance exclusions so you’re fully prepared.

* Terms, conditions, exclusions, limits and sub-limits may apply to any of the insurance products shown on the Mozo website. These terms, conditions, exclusions, limits and sub-limits could affect the level of benefits and cover available under any of the insurance products shown on the Mozo website. Please refer to the relevant Product Disclosure Statement and the Target Market Determination on the provider's website for further information before making any decisions about an insurance product.

^See information about the Mozo Experts Choice Home Insurance Awards