ASIC warns insurers cash settlements should not short-change homeowners in need

ASIC has published the findings of a review into how home insurers use cash settlements, covering around 65 per cent of the home insurance market. The review found that full or partial cash settlements, where the insurer pays an amount rather than managing repairs itself, were used in at least 63 per cent of the claims ASIC reviewed. For Cyclone Jasper claims specifically, two of the five insurers reviewed used cash settlements in more than 80 per cent of cases.

ASIC found that 52 per cent of cash settlement offers were based on a single repair quote, and that 73 per cent of those single quote offers came from a supplier preferred by the insurer rather than one chosen independently by the customer. The review also found that four of the five insurers examined failed to adequately support vulnerable customers through the cash settlement process. ASIC Commissioner Alan Kirkland said that accepting a cash settlement can shift onto the homeowner the burden of finding tradespeople, overseeing repairs and managing unexpected costs that an insurer would otherwise handle.

ASIC has said it expects insurers to give consumers enough information to make an informed decision when offered a cash settlement, and that offers should reflect the true cost of repairs. The regulator has indicated that consumers who believe they have received an unfair cash settlement may need to make a complaint to achieve a fairer outcome. This is a media release reporting review findings rather than a court or tribunal decision, and ASIC has not announced enforcement action arising from the review at this stage.