A year after the Canberra bushfires, some victims of the disaster are claiming their insurers didn’t do a satisfactory job. The industry doesn’t agree though, saying it can’t be blamed if homeowners are underinsured.

A story in last week’s Bulletin news magazine – headed “Burnt Offerings” – says treatment of Canberra fire victims was inconsistent and some families are still homeless because their insurer wouldn’t pay up.

But the Insurance Council of Australia (ICA) says payment problems affected only a tiny percentage of victims. In fact, ICA is relatively pleased with the overall industry response to the disaster.

“The Bulletin report refers to 77 complaints about insurance claims dealt with by the recovery taskforce’s insurance mediator,” ICA Executive Manager Corporate Affairs Rod Frail told Sunrise Exchange News.

“ICA statistics show 3585 claims were processed for a payout of $350 million… the article refers to only 2% of claims.”

The Bulletin article highlighted five Canberra families who had various insurance problems.

And it said many insurers were offering to pay only the banks’ estimates of replacement values of houses rather than the insured value set out in the insurance contract. It also stated underinsurance as another gripe. 

But ICA says the industry has constantly warned homeowners about the dangers of underinsurance and cannot take responsibility for every loss to policyholders in a major disaster.

“Insurers provide information to assist in the calculation of these amounts, but in the end it’s the responsibility of homeowners to ensure they have the right amount of insurance," Mr Frail said.

“It would be physically impossible and extremely costly for the industry to individually value over five million insured households in Australia.”

ICA dismissed the article’s call for an industry Code of Practice and market benchmarks, saying both measures already exist through the General Insurance Code of Practice and complaints schemes like Insurance Enquires and Complaints (IEC).

“Only six complaints were referred to IEC from Canberra,” Mr Frail said. 

The article also suggested various claims were treated differently by different insurers, a claim ICA suggests reflects the competitive nature of insurance.

“You can purchase Rolls Royce or Holden policies for appropriate premiums and their coverage does differ – a point ICA continually emphasises in its public messages,” he said.

Mr Frail says insurers acted on “an individual level and an industry level” throughout the bushfires and the Insurance Disaster Response Organisation liaised with the Government to ensure everything was on track.

“In a disaster of this scale, inevitably not everything will run smoothly," he said. “But the industry believes that, overall, it provided an effective response to community needs. Any issues that arose were examined and will assist in refining responses to the next disaster.”

However, one insurer is smiling about the Bulletin article. AAMI received the kind of positive publicity you can’t put a price on when one Canberra family spoke about its outstanding service throughout the claims process.