Australian Home and Contents Insurance Debacle: Definitions and Interpretations Used To Reject Claims?

The current home and insurance contents in Australia is the same way it has been for many years. Essentially, consumers do NOT know what they are buying. There are no standard definitions for what is covered in natural disaster situations. This article looks at the hypocrisy of the situation and offers a solution that is staring everyone in the face.

Every time Australian home owners are subject to large storm damage and flooding, we see the same situation reoccur. Many home owners who think they are covered, are not. Many claims are rejected by the home insurance companies are not always the fault of the insurance company. They always manage to present a number of reasons why this is the case. The solution is simple, and has yet to be implemented. Here is a look at some of the issues, before we highlight the easy and simple solution, that will stop this confusion, and Australians can get what they are paying for.

• Simple Summary of the Current Situation. What is actually a ‘flood’? What is ‘storm damage’? What is rain damage? All of these definitions are still very unclear. Despite the ACCC (Australian Competition & Consumer Commission) initially supporting the common definition of flooding by the ICA (Insurance Council of Australia), there has yet to be a settlement on the case. The rejection was due to the clauses in the legal documents that would reduce a “proximity clause”, and therefore, reduce the impact of the legislation. All of this information is freely available on the internet. Discussion increases each and every time disaster hits.

• Even More. The current definitions supplied by the ACCC essentially have no effect and have no legal standing. Furthermore, many of the insurance companies have their own separate definitions. Each of the definitions in different policies are different again from the recommended definitions of the ACCC. In effect, you are buying a legal document that has a definition supplied by the insurer, on the terms of their interpretation, at the time of an incident. Your only way to disagree with their decision not to pay your claim, is to invest in the will power and capital to fight a lengthy legal battle against a gigantic financial institution – good luck with that.

• Question 1. Why is it the Australian Government needs to negotiate with the ICA? Is the ICA an organization that represents the interest of insurance companies in Australia? This shows the influence over the Australian Government by the insurance companies. It is somewhat like you or me having a shop, and dictating to the government the laws of our operations and sales.

• Question 2. Why is it that insurance companies can sell us a product that is not clearly defined? Australia is a country with regularly occurring natural disasters, and [easyazon-link asin=”1605851647″]insurance coverage[/easyazon-link] against that, is a necessity. We have many laws for the requirements of necessities in relation to the rest of our living needs, from work, property obligations, rules and laws of driving, for example, but this area of our lives is left in a legal limbo. The legal documents that are written to make up a policy are so complex and wordy, a lawyer can only argue the case. There is still no clear definition. In essence, there is no way anyone can tell what they are buying, and they are at the mercy of the home and contents insurance company at the time when a claim comes about.

• Simple Solution. The simple solution to this situation is to have a government body that determines the definition of any area at the time of a disaster. The Australian Federal Government is giving away a range of subsidies and grants to those who were affected in Queensland. They have a range of tools to decide whether those relief funds are available to the community or not. This same system of evaluation can be applied to the case of insurance companies and claims. Mandatory definitions of flood, rain damage, water damage, to name a few, should be set by the Australian Government. The insurance companies then have the choice to offer that coverage or not, and consumers have a choice to buy it, or not. When I buy milk, I expect it to be milk. I should not have to argue that it is not milk because it isn’t after I have purchased. That is a simple comparison, but the principle is still the same.

This is a solution that will solve the current argument and debate that continues to persist without any hope of resolution. Who is benefiting from this on-going argument? The consumers or the insurance companies? A ridiculous situation where the normal principles of fairness and democracy in Australian culture and country are not being met.

This is not the case with so many other areas of our life, and yet persists in an area which is very real, and of great concern. What is the point of paying for home and contents insurance for 30 or more years and getting rejected on your claim? This happens when your home has been destroyed because you bought something that was unclear, ultimately undefined, and up for legal debate.