The latest report from the Financial Rights Legal Centre has revealed shocking experiences of insurance customers that denied rightful support relating to wild weather insurance claims from the recent storm events.

In a statement, the chief executive of Financial Rights Legal Centre Karen Cox noted that the last 18 months have seen an unprecedented number of highly severe and destructive weather events.

Generally, when a catastrophe hits an area, the residents need urgent help on several fronts including how to deal with their insurer. In such a burdensome and traumatic situation, disputes are simply inevitable.

This new report evaluated the experiences of at least 700 clients seeking assistance with regards to insurance claims following extreme weather events for the period between November 2019 and April 2021.

About 70% of these customers sort assistance relating to home and contents insurance while 45% of them needed support with their car insurance claims after hail damage.

Common insurance complaints

In the aftermath of an extreme weather event

The report highlighted five common challenges faced by insurance customers when trying to lodge their insurance claims after an extreme weather event.

1. Poor claims handling process: This involves delayed or confusing information, apparent bullying by insurance claims managers and obvious errors within the claims process. Approximately 20% of the centre’s clients encountered these challenges.
2. Cash settlement offers: Even though a cash pay-out can be an option of compensation to a customer for losses incurred, most of the participants felt insurance companies offered less amounts for rebuilding homes, or offers were extended to those too vulnerable to effectively manage repairs. Nearly 16% of people reported having experienced this.
3. Over-reliance on defect clauses: Insurers were heavily relying on defect clauses to reject claims citing that damage was due to a fault in design or construction of a home, even when it’s caused by a highly damaging event. Issues relating to this problem accounted for slightly below 9% of all client experiences recorded by the centre.
4. Underinsurance: When people fail to insure their property, home or car at the right value, then a claim may not fully cover all the repair and or replacement costs. The report showed that about 8% of people had inadequate insurance cover or one that was not specific to the weather events that affected them such as thunderstorm, flooding etc. This issue was most common among those affected by bushfires (18.3%).
5. Maintenance issues: Approximately 6.7% of experiences related to claims that were denied based on the allegation that the property was not well-maintained. This was regardless of the fact that no amount of proper management could have been prevented considering the severity of the weather events. 

Taking into account all these issues, Cox stated that insurers “should be better assisting people to identify the appropriate sum insured, and base cash settlement offers on the likely cost to the customer rather than the insurer.” 

The Financial Rights Legal Centre is pursuing targeted government subsidies that can help Australians residing in high risk areas with their insurance premium payments.

This would be timely considering that extreme weather events are growing in intensity and frequency due to climate change, and the national leadership should seriously address these heavy issues.

If you are concerned about getting caught out when you lodge your wild weather insurance claim, then this is the time to learn about what isn’t covered under the home insurance and common exclusions for car insurance so you can be fully prepared.