A Financial Rights Legal Centre report has detailed the leading five insurance problems faced by consumers following the Black Summer bushfires catastrophe and seven other recent extreme weather events up until April this year.

Poor claims handling including delays, poor communication and bullying tops the list, with 20.4% of the 706 clients who sought help from the consumer advocacy centre during the 18-month period saying they have experienced the issue.

Cash settlement placed second (15.7%), followed by defect clause (8.8%), underinsurance (7.9%) and maintenance (6.7%), the report titled “Exposed: insurance problems after extreme weather events” says.

The centre says the report shows good consumer experiences are far from universal, reinforcing the need for urgent reforms to ensure the public will be adequately protected in future as extreme weather events become more frequent and severe.

“What our clients’ experiences have shown us is that… it’s really, really difficult for people who have been impacted by sometimes really nasty and distressing events,” CEO Karen Cox told insuranceNEWS.com.au today.

“That trauma is compounded by their experiences of dealing with the insurance companies.”

While the number of requests for assistance is small relative to the overall claims that have been lodged with insurers from the eight catastrophes, the report says steps must be taken to address the failings as extreme weather events “are steadily becoming the new norm”.

“It is evident that events are already playing out as the science predicts,” the report says. “Climate science tells us that these risks are likely to increase, or move to new areas not previously subject to such events.”

The Insurance Council of Australia (ICA) has responded to the report, saying the industry has paid out more than $5.4 billion in natural disaster claims since the Black Summer bushfires catastrophe in late 2019.

“The ICA notes the [centre’s] comment that ‘requests for assistance is small compared to the number of claims relating to these catastrophic events’,” a spokesman for the peak body told insuranceNEWS.com.au.

“Insurers received more than 39,000 claims arising from the bushfires alone, totalling more than $2.3 billion dollars.

“More than 95% of these claims are now finalised and paid, supporting those communities in their recovery.”

The spokesman says the industry’s new code of practice, which came into effect this month, has a number of provisions covering the issues raised in the centre’s report.

Code provisions include obligations to provide consumers with access to a sum insured calculator for home building insurance, better information about cash settlements, and treating total loss claims with sensitivity.

“The code clearly sets out that insurers will respond to catastrophes efficiently, professionally, practically and compassionately,” the spokesman said.

The report says introducing an effective standard cover regime with standard definitions that are more in line with community expectations should be a priority.

It also says insurers need to improve the way they explain risks and costs to consumers and should consider including a 25% buffer in home policies of customers in high risk areas to cover for extreme weather events.

Where claims handling is concerned, the report says insurers must communicate with consumers in a transparent manner, clearly informing them how their claims will be assessed and the progress of their claims.

With cash settlement, consumers should be given the right to choose whether they want a cash payout or to have their properties repaired or rebuilt, with the process managed by the insurer.

Click here for the report.