Extended replacement and total replacement policies being touted in Australia as the newest way to help consumers are hardly new in the global market, according to the Sydney Morning Herald.

The policies aim to keep consumers’ cover up to date with soaring replacement costs.

Calling for the industry to do more, writer Annette Sampson says last year’s Cyclone Larry aftermath in Far North Queensland showed the “sheer idiocy” of a system that gives individuals full responsibility for calculating how much insurance they need.

“Even consumers prepared to pay to be fully protected would find it hard to calculate accurate rebuilding costs (and how much to increase them by each year) and how much to allow for unknowns such as a post-disaster building price hike and changes to building requirements.”

So far two big insurers have introduced total replacement policies that cover all rebuilding costs. Another two have introduced extended replacement policies, under which the insurer agrees to pay up to a certain percentage – usually 25-30% – above the sum insured.

Extended replacement policies might be relatively rare in Australia but they are standard in the US, and total replacement policies are common in the US and New Zealand.

“It seems our industry can still do much better,” Ms Sampson said.

She acknowledged progress has been made but says the industry should also provide more comprehensive levels of cover.