The Australian Securities and Investments Commission released a report on Monday highlighting that most home insurers are settling cyclone damage claims with cash payments, leaving many homeowners to cover additional repair costs. The regulator warned that this practice could produce unfair outcomes for vulnerable Australians, especially after Cyclone Jasper struck far‑north Queensland in December 2023.
ASIC’s review of claims from the five largest home‑building insurers – IAG, AAI, QBE, Allianz Australia and Sure Insurance – found cash settlements used in more than 63% of final claims. IAG and Allianz relied on cash payouts in over 80% of cases, often basing offers on a single quote from a preferred builder. In one instance, a builder supplied a quote at a 40% discount; the insurer paid that amount in cash, but the builder later refused to undertake the repairs at that price.
The report noted that insurers rarely recorded why they chose cash settlements and provided limited information to consumers about their options. Three insurers failed to inform policyholders that they could withdraw from a cash settlement, though two have since begun clearer disclosures. Four of the five firms also had inadequate processes for identifying and assisting vulnerable customers. While no breaches of legal obligations were identified, ASIC said compliance would improve if cash offers reflected market prices rather than discounted rates.
The findings come amid soaring construction costs and rising home‑insurance premiums, which have increased 51% over the past five years and rose 4.2% in the year to July, outpacing inflation. The Insurance Council of Australia attributes the surge to the climate crisis, noting that extreme weather now generates an average of $4.5 billion in annual claims.
