A homeowner who admitted underinsuring his property to cut premium costs has lost a bid to have his fire damage payout increased.

Hollard Insurance declined the claim following the October 2021 fire, citing non-disclosure by the insured.

However, after the man complained to the Australian Financial Complaints Authority, the insurer reversed its decision. 

It agreed to settle for $415,937, paying $300,437 for the building damage and $12,875 for the contents. Additional payments for temporary accommodation, non-financial loss compensation, professional fees and interest were also awarded. 

But the insured said the offer was unfair, arguing the policy underinsured his home and contents. Hollard countered that the settlement was above the policy’s sum insured of $240,350 for the home and $10,300 for the contents. 

The complainant bought the policy through his bank, acting as an authorised representative for the insurer.

He said the bank employee provided financial advice on the policy while failing to “make reasonable enquiries” into his financial position or review his personal circumstances. He said the AR also failed to arrange for the policy documents to be sent to his address. 

In a new ruling, AFCA says, based on the information provided, the AR does not appear to have provided personal advice. 

“While the complainant says the AR undertook to ‘fix everything up’ for the cover, the panel is not satisfied he provided sufficient detail to show he received personal advice.” 

The authority says the man told the insurer during an interview that he received the policy’s product disclosure statement and certificate of insurance – which confirmed the sum insured – and noted “no errors” with them. 

It says that during this interview, the claimant acknowledged he had underinsured the property to reduce the premiums. 

“I never expected anything like this to happen, so I obviously underinsured a few things there ... so I can, like, pay less, obviously,” the complainant told the insurer. 

AFCA says the man was aware of the sum insured, and the insurer is entitled to settle based on that amount. 

The authority has also rejected the man’s request for Hollard to pay for additional legal costs, beyond the $5000 it provided.

The complainant said a cognitive impairment meant he could not represent himself and he wanted the insurer to cover $27,500 in solicitor costs.

But the authority is not satisfied the man showed the “extent of his cognitive impairment” and says the insurer had “strong grounds” to investigate the claim, which led to the legal costs.

Click here for the ruling.