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Report shows insurance and the law are failing vulnerable Australians facing extreme weather events

Audio excerpts of Financial Rights Legal Centre Chief Executive Officer Karen Cox can be accessed below.

Urgent reforms are needed to ensure the nation can adequately respond in the aftermath of future extreme weather events and urgent funding is needed to ensure Australians can get legal assistance when they need it most.

While insurers often provide vital services to consumers well, findings from a new report by Financial Rights Exposed: Insurance problems after extreme weather events reveals that good consumer experiences are far from universal.

The report findings are based on the experiences of more than 700 clients impacted by extreme weather events between November 2019 and April 2021 – from the “Black Summer bushfires” to Cyclone Seroja, and multiple extreme weather events in between.

Financial Rights Legal Centre Chief Executive Officer Karen Cox said the centre’s Insurance Law Service experienced a surge in calls from people impacted by bushfires, storms, floods and hail during this unprecedented period.

“This 18-month period was extraordinary for the number and severity of extreme weather events,” Ms Cox said. “When catastrophe strikes, people need help on a number of fronts including dealing with their insurer. In this fraught and traumatic environment, disputes are inevitable.”

Ms Cox said at the same time demand for services was growing, Financial Rights was about to drastically cut back the hours of the Insurance Law Service because of a lack of funding for adequate staff.

“An inability to access free, specialised legal advice to help resolve insurance problems could put the welfare and livelihoods of thousands of people around Australia at risk and end up costing communities and the government a lot more in the long run,” she said.

“It has been particularly concerning to see how many people were left without flood cover after recent record rainfall, due to inability to afford the premiums.

“Many people are being left behind by rising insurance premiums in the face of increasing climate related risk.”

The report reveals the top five issues faced by clients affected by extreme weather events:

  1. Poor claims handling: including delays, poor communications, perceived bullying, and errors;
  2. Cash settlement offers: including the low ball offers to rebuild; cash settling vulnerable people who cannot easily manage repairs;
  3. Overreliance on defect clauses: where insurers deny claims based on the assertion that damage was caused by faulty construction or design of a home instead of the extreme weather event;
  4. Underinsurance: where people have insufficient cover to rebuild, no cover at all, or no cover for the specific event (for example, flood);
  5. Maintenance issues: including being denied coverage on the lack of maintenance on a building when the weather event was of such a magnitude that any amount of maintenance would have been insufficient to prevent the damage.

The report demonstrates how insurance and the law fail some of the most vulnerable Australians experiencing bushfire, floods, storm and hail, but also reveals how we can work to change the insurance sector for the better.

Governments and the insurance sector need to work together with consumer groups to urgently address these issues, Ms Cox said.

“Insurers should be better assisting people to identify the appropriate sum insured, and basing cash settlement offers on the likely cost to the customer rather than the insurer. Governments could be introducing targeted subsidies for vulnerable residents in high risk areas to pay their insurance or mitigate their risk. The experiences detailed in this report show the way toward improved insurance outcomes for Australians subject to extreme weather events,” she said.

“With extreme weather events increasing in both frequency and intensity due to climate change, national leadership is required to address these pressing issues.”

See Financial Rights publications including our report Exposed: Insurance problems after extreme weather events

Access audio clips of Financial Rights Legal Centre Chief Executive Officer Karen Cox