The overturning of thousands of home claim denials based on exclusions for wear and tear and maintenance backs use of a broker to optimise fair outcomes, intermediaries tell insuranceNEWS.com.au. 

An inquiry by the General Insurance Code Governance Committee (CGC) found of 42,956 denied home insurance claims examined, the majority (55%) relied on wear and tear/maintenance exclusions – a “concerning” trend indicating there “may be underlying systemic issues in decision-making from insurers”. 

The CGC is “alarmed” that when over 10,000 policyholders complained about the denials, half of the decisions were overturned in favor of the consumer.  

The Insurance Council of Australia (ICA) is reviewing the findings in detail, a spokesperson told insuranceNEWS.com.au today, and the issue has garnered a strong reaction from brokers. 

Safe Hands Insurance Group MD Phillip Carr says he has faced many instances of wear and tear claim denial and he believes insurers are acting “unethically”. 

"Every second or third claim,” he said. “We’ve got truculent behaviour on the march again – it’s just insurers being entirely belligerent because there is no one to hold them to account. 

“The wear and tear exclusion is incredibly hard to refuse because everything is damaged through wear and tear. It's deliberately vague because the more vague it is, it gives the insurers more wiggle room,” Mr Carr said. 

Arma Insurance Brokers Hunter Valley MD Amanda Morris says while insurers do appear to be “hiding behind” these exclusions, a broader cultural shift is needed in both the industry and society. 

"The behaviour of clients needs to change,” she said. “They must start to look after their property better as it ages. Insurance will be unaffordable if lazy claims like broken roof tiles continue to be paid. There is a happy medium.” 

Four Arma clients are currently contending with wear and tear and maintenance exclusions, Ms Morris tells insuranceNEWS.com.au. One had a claim for storm damage denied due to a cracked roof tile, and the insurer then also declined to renew their policy just over a week from the renewal date. 

The issue has come to a head because of a sudden crackdown by insurers without forewarning, Ms Morris says. 

“I don’t disagree with the insurers on this, I don’t argue that insurers should have to pay.  

“The onus should be on clients with property maintenance – but it never has been. Now it’s been completely changed to say ‘We want this now’. They are backflipping doing it now, and it is mayhem. Clients aren’t used to it. 

“It is really contentious in our industry. The behaviour of insurers is causing mayhem, it is frustrating,” Ms Morris said.  

She says all sides need to “take on the heavy lifting” to fix the issue, including brokers who have a role to play in education and can “go in to fight” for a client.  

She says there is a lack of qualifications among claims staff, and a large volume of claims and volatile weather has also played a part, and it is likely roof reports, and thermal imaging reports to reveal any issues in electrical wiring or meter boards, will be required in the future. 

Mr Carr notes the CGC questioned the impartiality of reports from experts appointed by insurers.  

“Insurers come out with engineers that are supposedly independent, but they're not independent. They're on payroll because of the amount of work. 

"Clients effectively need to take photographs of their property or their vehicle every three months just in case something happens. Any property naturally suffers a degree of degradation – how many people get on the roof and check? 

"The client is expected to engage their own roofer or expert at their own cost, and then it's expert versus expert.” 

The issue makes it harder for brokers to convince clients to take out insurance “when there's every likelihood that insurer will decline the claims,” he says.  

"How do we then turn around and be motivated to encourage people to take insurance … when the insurers are not there on that rainy day?” 

Parramatta-based Eminence Insurance & Risk Advisors Senior Insurance Broker Lenneta Monastiriotis takes a different view. She finds insurers encourage the client to get their own quote and assessors then “make sure everything's kosher,” and she has not witnessed issues with impartiality of expert reports from trades.  

“I haven't really come across too many like that – and I've been doing this for a long time,” she said. 

“I'm probably on the insurance side, they just can't cover everything. If there is wear and tear, I agree they need to be tough on that and exclude or alter the payments made,” Ms Monastiriotis tells insuranceNEWS.com.au. 

“I don't see that it is an issue and I think it's fair – insurance can't pay, that's ridiculous. Then the prices are just going to go up again. As an owner, you have some responsibility to maintain your property. 

“The claims that I've seen, they've been rightfully denied, or reduced to incorporate the wear and tear that was previously there. As a broker, you've got to tell the client, if you don't maintain your home ... then you're going to have an issue if a claim does occur.” 

The ICA says the report provides “valuable learnings for consideration,” and it was pleased with some examples of good practice, including identification of common complaints to improve communication with customers.