AAMI has paid $43,200 in penalties after the Australian Securities and Investments Commission (ASIC) found it made false or misleading statements in some adverts for home insurance.

Its “home building insurance complete replacement cover” ads on radio and AAMI’s website claimed the Suncorp brand would repair or rebuild insured houses regardless of cost.

ASIC was concerned this would lead consumers to believe AAMI would always repair or rebuild a home after a claim. However, AAMI can choose to pay the policyholder the assessed cost of repair or rebuild, leaving it up to them to organise the work.

The regulator stepped in after federal MP Sarah Henderson raised concerns over the experiences of 2015 Wye River bushfire claimants.

“The problem is AAMI will not rebuild the home itself – the policy does offer this discretion – and it is refusing to provide sufficient money to cover the cost of the rebuild,” Ms Henderson said.

She also accused the insurer of underquoting rebuild costs by $100,000-$250,000 in at least six cases.

AAMI has now settled all remaining Wye River claims and has amended its online advertising to say: “Once your claim is approved, we’ll choose to repair or rebuild your house as it was or pay you the cash equivalent.”

ASIC Acting Chairman Peter Kell says insurers need to be clear about how claims will be paid.

“Customers decide to take out a particular type of cover based on what is advertised,” he said.

“While we recognise that AAMI offers a type of home building policy that can help reduce the risk of underinsurance, advertising must not mislead consumers.”