The response of insurance companies to several major floods around Australia in 2022 was a reminder of the difference between what homeowners expect from their insurance policies and what insurers actually deliver.
After the floods of 2022, some policyholders reported that dealing with their insurer was as difficult as the weather event itself, especially when claims were rejected on the basis of what the insurer determined were pre-existing conditions or lack of maintenance.
Many claims that were accepted took far too long – sometimes years – to settle.
In August 2023, the federal government launched an inquiry into how insurers responded to the 2022 floods, with a final report due in September this year.
We are hearing time and time again that people are being re-traumatised by their insurers
CHOICE senior policy and campaigns adviser Bea Sherwood
As part of that process, CHOICE and allied organisations including the Consumer Action Law Centre (Consumer Action) and the Financial Rights Legal Centre (FRLC) are making the case for consumers at a hearing in the House of Representatives today.
Our appearance in Canberra follows a joint submission that we lodged earlier this year, drawing on the firsthand experiences of insurance customers affected by the 2022 floods.
"We are hearing time and time again that people are being re-traumatised by their insurers. Forced to wait months or years for an outcome, having their claims denied unfairly and not being sufficiently informed of the process," says CHOICE senior policy and campaigns adviser Bea Sherwood.
Practical steps to improve consumer outcomes
Their stories point to a number of areas where insurers continue to fall short, such as failing to properly manage the third-party contractors they hire to help process claims and make repairs, or not training staff to deal professionally and compassionately with flood-affected customers.
The consequences have been deeply personal, with individuals facing enduring emotional stress, trauma and strained relationships to this day
FRLC senior policy and communications officer Julia Davis
Along with the case studies, our joint submission recommended a number of commonsense steps insurers can take to better deliver on their promise to customers, including:
- dedicating more resources to claims handling
- communicating with consumers in a consistent, transparent and compassionate manner
- clearly informing customers how their claim will be assessed and how it's progressing
- providing appropriate support to vulnerable customers.
FRLC senior policy and communications officer Julia Davis says the organisation continues to support clients affected by the 2022 floods.
"The repercussions of the floods extend beyond financial strain for consumers. The consequences have been deeply personal, with individuals facing enduring emotional stress, trauma and strained relationships to this day."
Bridging the expectation gap
The view from the consumer side of the experience often runs counter to that of insurers, who have the power to approve or deny claims based on criteria they unilaterally define.
One example is defining what constitutes a failure to sufficiently maintain a property to the extent that floods and related weather events do more damage than they otherwise would.
How this exclusion is applied varies from insurer to insurer and from claim to claim, leaving policyholders at the mercy of claims processors and other parties acting for the insurer.
Insurers know what needs to be done to better support consumers. We don't see why they can't start now
CHOICE senior policy and campaigns adviser Bea Sherwood
The insurance industry has its own view of the issues and has long lobbied for governments to invest in mitigation infrastructure and share weather-risk data.
These remain valid recommendations, but insurers can take steps on their own right now. One example would be to reward homeowners who make their homes less vulnerable to weather events with lower premiums, or to proactively warn homeowners when they're underinsured.
Extreme weather events are only increasing in frequency and intensity. There's no better time for insurers to accept a duty of care to their customers.
"Insurers can and should be doing more to help people successfully navigate the claims process in the aftermath of extreme weather events like the floods of 2022," Sherwood says.
"We look forward to seeing the outcome of these hearings. But insurers know what needs to be done to better support consumers. We don't see why they can't start now."
Stock images: Getty, unless otherwise stated.
