The 2009 Victorian Bushfires Royal Commission has called on insurers to play their part in tackling underinsurance by making cover easier to understand and purchase.

The commission’s final report, released last week, has confirmed that non-insurance and underinsurance have impeded the rebuilding process as the community recovers from Black Saturday, which is estimated to have cost a “conservative” $4.4 billion.

The total cost of the disaster is well in advance of the $1.07 billion in claims received by general insurers. Around 30% of the 2029 homes destroyed were underinsured, and the commission says about 13% “might have been without insurance cover”.

During the 18-month inquiry the royal commission heard evidence that in many cases where insurance was in place households were underinsured because the owners had difficulty calculating insured values under the terms of their sum insured policies. 

“Under this type of policy, property owners are responsible for determining the sum insured and are likely to underinsure if they lack information about current building costs,” the report says.

The commissioners have called on the insurance industry to play a role in helping customers bridge the protection gap. While they acknowledge that some insurers already offer total replacement policies, their report calls for greater action.

“[The Insurance Council of Australia] and members of the insurance industry should continue to improve communication with consumers about underinsurance including in relation to total replacement cover and extended replacement cover, and the assessment and rebuilding costs,” the report says.

It acknowledges the role of the $389 million Red Cross Victorian Bushfire Appeal Fund in preventing a deeper underinsurance crisis.

The commissioners also called on insurers to do more for those on low incomes who may find it tough to pay premiums and excess charges upfront.

It recommends insurers focus on “no frills” insurance products for those with limited assets and allow fortnightly premium payments including transactions made through social welfare payment service Centrepay.