Insurers say they embrace an opportunity to engage with critics of loss recovery processes used during landlord insurance claims.

Last week, consumer group Choice and legal centre WEstjustice accused insurers of unfairly pursuing renters for accidental property damage costs after their landlords make claims.

The advocacy groups are demanding the corporate regulator investigate industry practice across landlord insurance and assess if insurers have misled people, or otherwise breached their licensee obligations to act efficiently, honestly and fairly.

The Insurance Council of Australia (ICA) told insuranceNEWS.com.au it welcomed further engagement via its dedicated Consumer Advisory Committee to explore the issues raised.

The ICA noted it has recently launched a new code which sets out clear obligations for insurers in relation to financial hardship and said that in general, “recoveries play a role in placing downwards pressure on premiums”.

A QBE spokeswoman told insuranceNEWS.com.au the insurer “very much welcomes feedback on our recovery processes” and it is "happy to review individual cases through our official channels”.

“QBE works within the regulatory framework set out for recoveries across the industry, which are aligned with the General Insurance Code of Practice including considerations surrounding financial hardship,” she said.

Choice and WEstjustice presented the Australian Securities and Investments Commission (ASIC) with examples, including QBE pursuing $183,000 and GIO more than $300,000 for fire damage and Chubb pursuing a renter for $3600 after a lock failure saw her trapped on a balcony and she called the fire brigade.

The pair are demanding an “urgent investigation” of insurers, who they accuse of sending legal letters and persuading renters to hand over money they are “unlikely to owe” in an abuse of power.

Insurers should publicly commit to not pursuing people who rent for unintentional damage, and disclose systems to make sure “no one is hounded for debt they don’t owe,” the consumer groups say.

“Australian insurers could immediately put in place policies and practices that stop harm to people who rent,” Choice Director of Campaigns and Communications Erin Turner said. “When Choice or WEstjustice approached insurers about these cases, some insurers dropped the claim. This is a clear sign that they should never have sent the demand in the first place.”

Ms Turner says sending an unexplained bill for hundreds of thousands of dollars fails the “basic standard of fairness”.