Financial counsellors have called for claims handling reforms in a supplementary flood inquiry submission that provides data on cash settlement shortfalls and feedback from more recent client experiences.

“In our initial submission, we touched briefly on inadequate cash settlements being offered by insurers as well as the life-changing outcomes financial counsellors were able to negotiate on behalf of their clients,” Financial Counselling Australia co-ordinator for disaster recovery Vicki Staff says on LinkedIn. “We now have data that shows what we believe to be the widespread practice of offering inadequate cash settlement amounts.” 

Data from one agency serving a regional Victorian area shows counsellors negotiated a total increase of more than $3.3 million on cash settlements offered to 40 clients, at an average of $83,182 per client. 

The increases reflected the overturning of previously declined claims, problems with scopes of work, temporary accommodation issues, uplifts requested and non-financial loss compensation. 

Counsellors, who lodged their first submission nine months ago, say the latest document reflects systemic problems still emerging, particularly in Victoria, and more recent Queensland disaster responses that offer a window on what has changed or stayed the same since the 2022 floods. 

The update recommends allowing insureds to request a review of their claim up to 12 months after settlement if the claim was settled within 12 months of a catastrophe. Currently, the industry code of practice allows a review if the claim was settled within one month of the disaster. 

Counsellors say deeds of release that prevent customers disputing a claim in the future should be banned for home and contents. 

“Unknowingly accepting an insufficient cash settlement offer happens because most insureds are not qualified tradespeople,” the submission says. “They trust that their insurer has offered them a fair sum based on an assessment of the damage carried out by an insurer-appointed expert.” 

Deed confidentiality and non-disparagement obligations have left clients “too scared to speak” at recent House of Representatives flood inquiry hearings for fear insurers would take civil action against them, it says. 

Counsellors propose temporary accommodation should be offered for 24 months after a catastrophe, with customers given examples of options available and asked their preferences. Having internal complaints handled by the same person who dealt with the initial claim should be banned. The resilient homes schemes introduced in Queensland and NSW to buy back, raise or retrofit flood-affected properties should become a national arrangement, the submission suggests. 

The counsellors note that one of the inquiry’s discussions overlooked that people may choose to buy in risky locations, even when aware of the dangers, as they make the best decisions they can with limited resources. “The reality is that housing in flood zones is affordable, and some people will therefore decide that owning a home in a flood zone is better than owning no home at all,” they say.