Asic Warns Insurers Short-Change Homeowners With Cash Settlements

The Australian Securities and Investments Commission released a report on Monday warning that home insurers are using cash settlements to leave vulnerable homeowners short-changed. The regulator conducted a review of claims stemming from Cyclone Jasper in far north Queensland and found that cash settlements were used in over 63% of final claims.

Insurance Australia Group and Allianz Australia exceeded 80% in their use of cash settlements. Asic found that payouts were frequently based on a single quote from preferred builders who provided discounts to insurers that were unavailable to consumers. This practice forced homeowners to pay the difference for repairs out of their own pockets.

While Asic did not identify specific legal breaches, it urged insurers to base offers on market prices rather than discount rates. The report also highlighted that four of the five insurers reviewed, including QBE Insurance, maintained flawed systems for identifying and assisting vulnerable customers. The Insurance Council of Australia noted that extreme weather has generated an average of $4.5bn in annual claims during the 2020s.