Home insurers in Australia are largely using cash settlements for claims, which may leave homeowners responsible for additional repair expenses, according to the Australian Securities and Investments Commission (Asic).
A report released by Asic on Monday found that more than 63% of final claims reviewed were settled with cash. Insurers such as IAG and Allianz used full or partial cash settlements in over 80% of their cases.
Asic Commissioner Alan Kirkland stated that homeowners are then left to manage finding tradespeople, overseeing repairs, and paying for unexpected costs. The regulator is calling for "realistic" larger payouts, warning that the current practice could lead to "unfair outcomes" for vulnerable individuals.
The review, which included companies like IAG, AAI, QBE Insurance, Allianz Australia, and Sure Insurance, found that most cash settlement offers were based on a single quote, often from the insurers' preferred suppliers. Asic expressed concern that these quotes might not adequately cover customers' repair costs, as customers may not receive the same discounts as insurers.
The report also noted that four out of five insurers had flawed methods for identifying and assisting vulnerable customers. While no legal breaches were identified, Asic suggested insurers would comply with rules by basing cash settlement offers on market prices rather than discounted rates.