Financial Rights called for the federal government to step in to standardise key insurance terms like “maintenance” and “wear and tear” as soon as possible. These terms have been over-relied on by home building and contents insurers to deny claims and causing unnecessary consumer harm for years.
Financial Rights’ comes in response to the Australian Competition and Consumer Commission (ACCC) release of its draft decision to not authorise the Insurance Council of Australia (ICA) to introduce their own set of definitions for these terms. Financial Rights and other consumer groups argued in a joint submission to the ACCC consultation that the application should be opposed on the simple basis that it fundamentally failed to address any of the problems that consumers experience. The ACCC draft determination aligns with this view.
Quotes from Drew MacRae, Principal, Policy Development, Financial Rights Legal Centre
“For years, the Insurance Law Service has heard from large numbers of home insurance policyholders who have had their home insurance claims denied by insurers based on a lack of “maintenance” and “wear and tear”. However, these denials have been made with little to no evidence linking the “maintenance” or “wear and tear” to the actual events that caused the damage. Already vulnerable homeowners are then shocked and understandably upset when this occurs, expressing confusion over what was expected of them to meet terms that are largely undefined and vague.”
“What is required is a set of standard definitions for “maintenance” and “wear and tear” that reduces this confusion, aids homeowners to understand what is expected of them, and reduces the number of claims denials we see.”
“The Insurance Council’s proposed definitions did little if anything to address these issues, and the ACCC has made that very clear in its proposal to not grant authorisation.”
“Given this, the Government needs to step in and include the definitions for “maintenance” and “wear and tear” in their previously announced work to standardise key natural hazard terms like “fire” and “storm”. Terms like “maintenance” and “wear and tear” are also overwhelmingly relied on by insurers to deny claims after natural disasters.”
“Over half of the complaints arising out of claims denials based on “maintenance” and “wear and tear” are overturned by the Ombudsman in favour of the consumer. That is shocking and demands action by government as soon as possible.”
Further background
Financial Rights Legal Centre operates the Insurance Law Service.
- ACCC draft determination opposing the ICA Authorisation Application
- Joint consumer submission to the ACCC consultation
Contact
For further information contact [email protected] or 0404 604 978
