The Australian Securities and Investments Commission's (ASIC) report into underinsurance also raised issues about the quality of online insurance calculators and their ability to provide concise and effective quotes for homeowners.

The report says online calculators “are of uneven quality and some may suggest figures that are significantly too low”.

It acknowledges that while not all calculators are the same, the “best calculators ask 20-30 questions about your home and take all the features identified into account in providing an estimate”.

ASIC tested the calculators of nine insurers using five homes in the ACT, NSW, Queensland and Victoria.  The tests found the smallest variation between the lowest and highest estimates of rebuilding costs for the same house was 42%, while the largest gap between the lowest and highest estimates was 169%.

Now the regulator is currently coming up with relief and/or guidance for providers of online calculators as part of its role in the Government’s proposed financial services reform refinements. The project has a November deadline.

The report says more sophisticated calculators use a process called “elemental estimating”, which takes into account features that increase the cost of rebuilding, such as whether the house is built on a severe slope, the quality of the finishings or the period of construction.

But the Insurance Council of Australia doesn’t appear too keen to admit there are inconsistencies with the calculators. Executive Director Alan Mason says they are “merely aids to help the policyholder, who is inevitably in the best position to know about the property being insured”.