Cash settlements on home insurance claims leaving vulnerable Australians short-changed, Asic says
Summary
Australian home insurers often pay claims with cash settlements based on low repair quotes, leaving homeowners to cover extra costs. The Australian Securities and Investments Commission (Asic) warns this practice may cause unfair financial problems for vulnerable people after events like Cyclone Jasper.Key Facts
- Most home insurance claims are settled with cash payments rather than insurers managing repairs directly.
- Insurers usually base cash offers on a single quote from their preferred builders, which may be discounted and too low.
- Homeowners often have to find their own tradespeople and pay additional repair costs beyond the settlement amount.
- More than 63% of final claims were paid with cash; two big insurers, IAG and Allianz, used cash settlements in over 80% of cases.
- Insurers do not consistently explain consumers’ rights to change their minds after accepting cash settlements.
- Four out of five major insurers have poor systems to identify and help vulnerable customers.
- Construction and repair costs have increased sharply in recent years, pushing up home insurance premiums by 51% over five years.
- The regulator says insurers should base cash offers on true market prices, not discounted quotes, to be fair to consumers.
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