INSURANCE: Cash settlements never a risk-free option says ASIC report
Consumer advocates say a timely new report from the Australian Securities and Investment Commission (ASIC) underscores what they have long been hearing about on their frontlines; insurance cash settlements -especially after disasters- come with huge risks, risks which are compounded by consumers not being provided with enough information to determine if accepting the offer is in their best interests or not.
ASIC’s report Beyond the payout reveals worrying trends: two-thirds of final home insurance claims include a cash settlement that is often based on quotes from the insurers preferred suppliers. Of even more concern, in reviewed files 4 out of 5 insurers failed to support customers in vulnerable situations.
“With cash settlements forming part of the majority of home insurance claims, transparency has never been more important,” said Meg Dalling, Assistant Director, Consumer Action Law Centre.
“Without clear information about the risks, responsibilities and alternatives available, consumers can be left carrying unexpected costs and managing complex repairs themselves.
“These impacts can be particularly significant for consumers experiencing vulnerability, who may already be dealing with the financial, housing and emotional consequences of a major loss,” Ms Dalling said.
Quote attributable to Julia Davis, Principal, External Relations & Advocacy:
“It is concerning that ASIC’s report found that about two thirds of home building claims now include a cash settlement component. Cash settlements are not a risk-free option for households. Many people don’t realise that once they accept the payment, they may be responsible for any additional repair costs.
“At Financial Rights we have seen lots of examples of cash settlement offers that were inadequate to repair all of the claimable damage.
“Insurers must make sure people understand exactly what they’re agreeing to and are not pressured into settlements that leave them worse off financially or left with repairs that they can’t manage or can’t find trades to help with.”
ENDS
Media contact: media@consumeraction.org.au or 0413 299 567
