"We continue to face challenges with underinsurance": ASIC's Peter Kell
In a speech today made to the Insurance Council of Australia (ICA) by ASIC’s deputy chairman, Peter Kell, he expressed that there will be a new focus on residential home insurance with challenges still faced with underinsurance.
Noting that there has been improved time across the industry to handle an insurance claim, demonstrated through the New South Wales bushfires ICA data, particularly in cases that involved the total loss of residential homes, Kell said that there was more to be done.
"We understand that claims arising from the NSW bushfires have highlighted a number of cases of underinsurance where consumers have found that, notwithstanding their claim being paid in full, they are unable to rebuild their homes,” he said.
Some of the reasons behind this underinsurance he noted, although mentioned that others would have a clearer picture. He said it may include challenges for consumers when it comes to setting an appropriate sum, using online calculators effectively, the affordability of insurance, the effect of increased rebuilding costs during times of natural disaster and the effect of changes in local building regulations as a result of the risk.
As a result of this, there is a home insurance review to be undertaken. Currently, the sale of home insurance policies are under review after the Queensland floods clearly revealed issues surrounding home owners’ understanding of flood cover, prompting “concerns about the transparency and comprehensibility of cover."
"Many consumers were unaware that their home building and home contents insurance policy either failed to cover flood or limited the cover, or did not adequately cover all 'types' of flood damage, such as flash flooding,” said Kell.
This new review will build on a 2005 and 2007 review into home building underinsurance, and a 2003 examination around the causes of home building underinsurance after the Canberra bushfires in 2003.
They look to examine the following:
The role of sales scripts at point of sale in providing transparent information and guidance to consumers when taking out insurance
The use of calculators as a tool to assist consumers to set a sum insured
How consumers can get readily accessible and consistent access to information about the policy through the sales process
How issues of affordability affect consumer choice
Consumer behaviours and decision biases when purchasing home insurance
The role of advertising in consumer decision making about insurance
The relative importance of premium price compared to policy coverage and features
They anticipate that the findings will assist home owners when understanding policy coverage, and to by extension protect their homes, especially in the event of a wide-scale natural disaster.
The report is expected for mid-2014, and will then be presented to the government.