In the aftermath of the Queensland floods, CHOICE is calling on insurance companies to clean up their act and not use the recent disaster as a reason to jack-up premiums or abandon residents in flood-prone areas.
New CHOICE research has found that while many consumers have been hit with massive hikes in their home and contents premiums as a result of mandatory flood cover or repricing of existing cover, insurance companies are not being fair or transparent in the process.
“Consumers are seeing their premiums double, triple and in some instances increase five-fold with often inappropriate justification from the major insurers as to why,” says Alan Kirkland, CEO of Choice.
Nearly 60% of 1435 people surveyed by CHOICE noticed an increase on a recent renewal notice, and when a reason for the increase was recalled, it was almost always flood-related.¹
“One minute major insurers have been telling consumers the price rises are necessary due to the large payouts from the 2011 floods, while the next they are saying the rises are because a property has been specifically checked out and identified as being in a high-risk flood zone,” says Mr Kirkland.
CHOICE’s research shows that major insurers are also using inconsistent techniques to assess flood risk, including Google Maps and “secret” assessments that they will not reveal to homeowners, local government or the National Flood Risk Information Portal.
In one instance, a policy holder was invited to speak to a major insurer as it lacked the technical expertise to understand a local catchment authority map he had used to prove his home was not a flood risk. He refused and went with another insurer.
“There are reports of insurers purposely pricing themselves out of postcodes that are prone to flooding, even if there are homes that are on hills or not near the flood zone,” says Mr Kirkland.
The explosion in premium prices also saw a 35% increase in general insurance disputes lodged with the Financial Ombudsmen Service in 2011-2012.
“Our major concern is that some consumers are forgoing household insurance altogether because they simply cannot afford the new premiums,” says Mr Kirkland.
“After a will and testament, home and contents insurance is one of the most important documents in many people’s lives – insurers have a responsibility to play fair and also ensure that this vital consumer product remains affordable for all Australians.”
¹ CHOICE conducted a nationally representative survey of 1435 home and contents customers in November 2012. In addition to this, they have received detailed and documented input from CHOICE members and consumers throughout 2012.