How Domestic Insurers Use Cash Settlements to Underquote Repairs
Domestic insurer cash settlements and underquoting repairs…
Domestic insurers have been gradually doing this more and more over the last few years (but now I am afraid it is pretty much standard practice).
They offer cash settlements from preferred repairers that won’t cover the cost of the actual repairs. Often the scope of works proposed is also not sufficient.
So many insureds get duped by this, many are so happy to just get something from the insurer that they jump at the prospect of getting the claim settled and getting cash in their hand. This growing practice by insurers plays into that fear.
What worries me even more than this and the typical attempts to deny liability at any sniff of a maintenance, wear and tear, defects or movement exclusion is that the regulators are not doing enough to ensure these behemoth insurers are kept to their contractual promises.
Remember this is a multi-billlion dollar industry, many domestic policies are now sold through intermediaries like supermarket brands and brokers are rarely involved to hold insurers to account.
Success is no longer about great cover and great claims practices. It’s about mass marketing, minimising administrative costs and claims control - which includes a suite of concerning practices including this one related to cash settlements.
Homeowners and domestic insurers are really not being regulated closely enough on claims practices.
ASIC and the Australian Financial Complaints Authority are really not doing enough!
This is particularly problematic because in most cases insureds don’t know the difference between a cash settlement and any other type of insurance settlement and so they unwittingly walk themselves into accepting something less than they should.
Does ASIC really think it’s enough to “call on insurers” to improve their practices?
What do you think?
I think insurers will do what’s financially in their interests and until AFCA and ASIC start:
-
a program of monitoring this closely; and
-
introducing heavy repercussions like punitive penalties and fines for insurers who are applying unfair practices.
Plus if ASIC have found 4 out of 5 insurers failed to consistently apply policies for dealing with vulnerable customers - this is systemic conduct and needs to be stamped out.
Domestic home insurance in Australia is really becoming a worry, it is a bit of a help when a claim occurs (plus a lot of stress) and rarely a fully insured loss without a fight.
This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Recent articles
-
A Satirical Look at How Professional Indemnity Claims Really Get Handled
Introducing Continuity Perpetuity, a fictional insurer whose proprietary claims methodology ensures every claim is perpetually considered and then vigorously defended.
-
Royal Commissions Spectacle or Genuine Reform
With Victoria's Royal Commission into major construction projects underway, the real question is not who gets called or charged. It is what actually comes out the other end.
-
Does Victorian Building Warranty Insurance Really Protect Subsequent Owners
A significant concern is emerging about the practical protection warranty insurance gives to people who buy a home after the building works are finished. Fall-Armytage brings it into focus.
-
How Domestic Insurers Use Cash Settlements to Underquote Repairs
Insurers increasingly offer cash settlements from preferred repairers that will not cover the cost of the actual repairs, and the scope of works proposed is often not enough.