More than half of assessed offers relied on only one repair estimate.
The Australian Securities and Investments Commission (ASIC) has warned that home insurers may be leaving Australians exposed to higher repair costs by relying on cash settlements for a large share of claims.
The Australian Securities and Investments Commission (ASIC) found that full or partial cash settlements were used in at least 63% of the claims it reviewed.
For claims related to Cyclone Jasper, two of the five insurers reviewed used cash settlements in more than 80% of claims.
ASIC Commissioner Alan Kirkland said insurers need to ensure cash offers reflect the actual cost of repairs and give consumers enough information to make informed decisions.
Cash settlements can give homeowners faster resolution and more flexibility, but they also leave consumers responsible for finding tradespeople, managing repairs and covering unexpected costs.
ASIC found that 52% of the cash settlement offers it reviewed were based on a single quote. Insurers often relied on quotes from preferred suppliers, which ASIC said may not reflect the prices consumers face when arranging repairs themselves.
“If the amount falls short, consumers can be left shouldering the cost of repairs and paying the difference out of their own pocket,” Kirkland said.
ASIC also identified weaknesses in how insurers handled vulnerable customers during the claims process.
Four of the five insurers reviewed did not consistently apply their policies for supporting vulnerable consumers. In some cases, insurers failed to record information about vulnerable customers or share it with third parties involved in handling the claim.
The regulator also found that settlement amounts could increase significantly after consumers complained, raising concerns about whether some initial offers were fair.
“Consumers shouldn’t have to fight for a fair settlement. Australians have a right to expect a fair offer from the start,” Kirkland said.
ASIC is calling on insurers to improve how they communicate cash settlement offers, provide clearer information about consumers’ rights and options, and ensure settlement amounts are based on realistic repair costs.