IAG is testing a “no-frills” home building policy in Queensland before a planned national rollout.

The InsureLite product is aimed at households that cannot afford traditional home building cover, or as IAG puts it, those suffering “home insurance affordability stress”.

If a house is destroyed or deemed irreparable, the cover provides a new three-bedroom home built to the value of $150,000 or $200,000, as pre-selected by the customer, or a lump sum payment.

Customers are not required to pay an excess. Instead they pre-select a minimum $5000 or $10,000 damage threshold. Once repairs reach that point, they can make a claim.

IAG GM of Venturing Ron Arnold says one in 20 Australian homes lack insurance.

“InsureLite is a new option to help bring some of these households back under the protection of insurance,” he said.

“We believe every Australian should have access to home building insurance, and for some this means no-frills policies that provide essential levels of protection for rebuilding or restoring a home after it is severely damaged or destroyed.

“For many families, InsureLite will provide both peace of mind and fundamental levels of protection.”

Mr Arnold told insuranceNEWS.com.au InsureLite was developed following extensive consultation with community and welfare groups.

The fact some families feel priced out of home insurance is not a revelation, but it prompted a fresh approach.

“It forced us to challenge ourselves about what we think of our product and recognise that one size doesn’t fit all.

“We understood that we had to be quite innovative about how we address the affordability issue.”

Mr Arnold expects the Queensland trial will prompt feedback that determines any necessary changes before the product is ready for national release.

“Insurance affordability is a complex problem, so we’re seeking reaction to the product and whether it’s genuinely providing a solution for those people who, for whatever reason, feel they can’t afford to get into the home insurance market.

“Our response will be informed by community feedback. We want to know what works and what doesn’t, and at the end of that process we feel confident we can come up with a sustainable solution based on this product.”

Earlier this year IAG successfully piloted an initiative to reduce strata premiums, announcing $1.3 million in customer savings in north Queensland from the implementation of disaster mitigation measures.