Insurers are keen to get as far away from the Black Saturday rebuilding efforts as possible before the extent of underinsurance is revealed, a loss adjusters’ seminar was told last week.

The Australasian Institute of Chartered Loss Adjusters (AICLA) seminar dissected a hypothetical claim made after the Victorian bushfires in Kinglake, with adjusters bringing their own experiences of the event into the mix.

AICLA Victorian chapter president David Brown says he hasn’t seen a single case that hasn’t been underinsured, and all the clients he has handled have taken cash settlements.

He told insuranceNEWS.com.au that none of the claimants he has dealt with have opted to rebuild with the insurer, and he expects this will be the case for many other bushfire properties as well.

He says this is because insurers don’t yet know what the on-costs will be following revision of building standards for homes in bushfire-prone areas. But he believes claimants’ sums insured may not cover the additional costs of meeting the new standards.

“In three or four months when all the planning permits are issued and the clients have been given their quotes to rebuild houses, there’ll be people falling off their chairs because they won’t believe how much more it’s actually going to cost."

GIO Home Portfolio Manager Dennis O’Brien told insuranceNEWS.com.au that while the insurer recommends customers rebuild with them, many Victorian bushfire victims aren’t even sure if they want to return to the area.

But he agrees underinsurance is a problem.

“If you run out of sum insured then we can’t rebuild it for you,” he said. “You could negotiate and decide to build a smaller house, and GIO does have a 25% safety net feature in its policy to cover surges in building costs.”

He says GIO has found rural residents tend to underinsure because assets outside the house, such as garages, water tanks and fencing aren’t always taken into consideration when calculating sums insured.

In its submission to the Victorian Bushfires Royal Commission, CGU says its customers who lost their homes have been provided with a number of settlement options, including rebuilding, building a new home at another location or taking a cash settlement.

“While CGU’s focus is on resolving claims quickly, we have been very mindful that these customers are dealing with a traumatic event, so we encouraged customers to carefully consider all of the options,” the insurer said.

“While cash-settling is an easy option, it has a short-term focus and means that customers forego any ongoing support from the insurer during the rebuilding phase.”

A spokesman for AAMI told insuranceNEWS.com.au their home building insurance policy comes with complete replacement cover, so its customers “can’t be underinsured”.

She says some people have still chosen to cash settle but can come back to the company if they believe it’s not enough to rebuild. The cover was launched after the 2003 Canberra bushfires.