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Home insurers making improvements to reduce underinsurance

A report by ASIC has found that home building insurers across Australia have improved their policies and are providing consumers with better access to information about the costs of rebuilding. The report, Making Home Insurance Better, examines the steps the industry has taken to improve its practices since the release of an ASIC study into underinsurance in 2005. That study was prompted by the 2003 Canberra bushfires, which destroyed 488 homes and revealed their owners were, on average, underinsured by 27 to 40 per cent. ASIC’s report found: Two insurers have introduced ‘total replacement’ policies. These policies pay the rebuilding costs in full, rather than paying the ‘sum insured’. Two insurers have introduced ‘extended replacement’ policies, which pay 25 per cent or 30 per cent above the original ‘sum insured’; Many insurers have given their customers access to more accurate calculators to estimate rebuilding costs; and More insurers are providing consumers with educational messages about underinsurance, particularly on renewal. ASIC recommends that consumers check whether their home building insurance cover is adequate by: Reviewing their insurance cover – especially people in high-risk areas (cyclone, bushfire, hail). Using online calculators now offered by many insurers as a guide for determining an adequate level of cover and the costs of rebuilding. Checking the sum insured against current rebuilding costs – particularly for policies of 10 or more years Shopping around and comparing policies. Making sure their home is regularly maintained and repaired; failure to take reasonable care may result in insurance claims being refused or reduced.

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