The industry’s long and relatively unsuccessful underinsurance campaign has been given a boost with the Australian Securities and Investments Commission (ASIC) raising public awareness on the issue.

Last week Delia Rickard, ASIC’s ACT Regional Commissioner and Deputy Executive Director of Consumer Protection, released the report “Getting home insurance right: A report into underinsurance”, which was inspired by the fallout from the 2003 Canberra bushfires.

The report, which was initiated by the regulator not long after the bushfires, found Canberra homeowners affected by the fires were, on average, underinsured by 27-40%.

“It’s a tragedy to lose your home in a bushfire, or any disaster, and only made worse if you are unable to rebuild because your insurance cover is inadequate,” Ms Rickard said.

The report showed at least 27% and up to 81% of homeowners are currently underinsured by 10% or more. “The experience of victims of the Canberra bushfires suggests that the actual level is probably towards the higher end of this range.”

Nearly a quarter of policyholders didn’t increase their insurance following renovations costing between $20,000 and $60,000. “An unknown number of consumers choose to be underinsured and it is likely that many of these are influenced by price,” Ms Rickard said.

And then there are those who don’t insure at all. The report also found policyholders affected by the bushfires placed a heavy reliance on insurers to “either set, or assist them in setting, the sum insured under their policy”.

“While the scale of the Canberra fires may have increased building costs, the primary source of consumer problems was earlier, when the sum insured on their policies was set too low, or was not increased in line with increasing building costs over the years,” Ms Rickard said.

ASIC says it will work with the Insurance Council of Australia (ICA) and insurers to continue to work on the issue – a move ICA says it “looks forward to”.

“ICA and its members have conducted a number of surveys and public awareness campaigns over many years and found that there are no simple answers, as this report seems to acknowledge,” ICA Executive Director Alan Mason said.

“The industry has already adopted a number of the lessons learned in the new General Insurance Code of Practice to be phased in by next year. It will include requiring insurers to provide more information to help policyholders determine their level of cover, recognition of financial hardship, and a cooling-off period to enable claims to be amended.”