An IAG policyholder who says she was underinsured by almost $600,000 after her house was destroyed in a bushfire has lost a dispute after arguing that the insurer did not advise her on the “appropriate level of cover”.

The Australian Financial Complaints Authority (AFCA) says IAG – like every other general insurance provider – is not allowed to provide personal advice, meaning it cannot offer a recommendation or opinion about the cover based on the complainant’s individual circumstances.

“An insurer can only provide general advice,” AFCA ruled. “Therefore, the insurer was not able to offer any advice about an appropriate sum insured for the complainant’s building and contents.

“Instead, the onus is on the complainant to ensure a property is adequately insured.”

The financial dispute resolution body also dismissed all other matters raised by the complainant, whose claim was accepted by IAG.

The complainant says she was entitled to an additional 25% of the sum insured and the amount the insurer would have paid for removal of debris had the state government not had a clean-up program. She also wants IAG to compensate for what she insists is its poor handling of the claim and reimburse her $3760.35 – a cost she incurred to engage a third party to assist her.

AFCA says IAG is not required to make any further settlements, ruling the insurer has “fairly treated” the policy taken up by the complainant.

Details provided in the ruling show IAG made a “commercial decision” to increase the complainant’s settlement by 25% after a dispute arose during the claim assessment over whether the complainant held a home or home plus policy.

As IAG could not find the call recording for December 2 2019, the day the complainant bought her policy, the insurer decided to add another 25% to the claim payout. This is because the home plus policy contains a safety net benefit that increases the sum insured by 25% in certain circumstances.

It also increased the period payable for temporary accommodation from 12 to 24 months.

AFCA says IAG’s decision is fair given the absence of the call, the insurer’s claim notes stating sales people should generally bring home plus cover to customers’ attention, and the uncertainty as to whether the complainant took this up or whether the insurer’s consultant brought this extra cover to her attention.

It says the complainant is not entitled to the further 25% payment she is seeking in addition to the home plus safety net.

AFCA says the policy wordings do not provide both the safety net feature and a separate 25% protection for underinsurance. The website referred to by the complainant also does not show two separate benefits.

“It only shows the one benefit,” AFCA said. “This presumably refers to the safety net.

“Even if it does not, there is no evidence the complainant relied upon this website when purchasing the cover.”

AFCA says it is not persuaded that the complainant required outside help with her claim and dismissed her application to be reimbursed for hiring the third party representative.

It also says the complainant is not entitled to a removal of debris benefit payment.

“There is no dispute the complainant has been settled the full sum insured of the property at the time of the loss,” AFCA ruled. “There is nothing to indicate the insurer deducted from this amount any costs towards demolishing or removal of debris.”

Click here for the ruling.