Insurance companies slammed over ‘shocking’ treatment of flood victims

The insurance industry has been blasted over the “relentless obstacles and resistance” faced by flood victims, with some having to fight for more than a year despite having valid claims.

Exclusive: The insurance industry has been blasted over the “relentless obstacles and resistance” faced by flood victims, with some having to fight for more than a year despite having valid claims.

The stern criticism has emerged from submissions to a new federal parliament inquiry into the industry’s response to the 2022 east coast rain bombs.

Financial counsellors, consumer advocates and authorities who had to deal with thousands of disputes say insurers made bad situations worse with inadequate communication, significant delays and issues in claims handling, as well as confusing terms and definitions in policies.

A joint submission by the financial counselling groups both state and national said “case studies reveal a distressing pattern of delayed claim resolutions … policyholders reported being mired in uncertainty and enduring persistent anxiety as they navigated this lengthy ordeal”.

“The extreme length of time to reach a resolution has caused severe financial strain, emotional distress, and continued disruption to their lives.”

Eugowra flood victims Lesley and Brian Smith with their dogs. Picture: Kim Storey

The Australian Financial Complaints Authority, which has dealt with nearly 3500 disputes from the floods, said it was “particularly concerned about the rates of delay-related complaints escalated to external dispute resolution.

The House of Representatives inquiry is also looking at the increasing unaffordability of insurance.

Water flooding the Smiths’ home in Eugowra.

There have been more than 3500 disputes raising over insurance payouts for floods.

A range of ideas of lowering costs have been raised, including cover that only pays for a partial rebuild.

There are also calls for subsidies for people who can’t afford protection.

QBE has told the inquiry that as part of new research into natural catastrophe risk and coverage, it is investigating “co-insurance”, where homeowners pay much higher excesses to reduce premiums.

A spokeswoman said it is ­already offering excesses of up to $10,000 through its call centre, but not online.

The couple and their dog being rescued by helicopter during the floods.

Youi said in its submission there has been a big jump in the number of customers choosing a higher excess.

Meanwhile IAG is pushing for more “mitigation infrastructure”, such as levees.

Lesley Smith and her husband Brian of Eugowra in the central west have had a 14-month fight with CommInsure over their claim after being flooded in November 2022.

“It was a nightmare,” Mrs Smith said. “My routine, every Monday morning, was ringing the insurance company to try to find out where it was at. Every time I rang I had to go through the call centre and tell the whole story again. Mentally it was very draining.”

The payment was recently made and the couple hope their new home will be completed by the end of this year.

Mrs Smith said the full cost “will be covered by the insurance because we fought for the extra they weren’t going to pay”.

She said help from Legal Aid NSW had been “brilliant”.

Local federal MP Andrew Gee said: “The rebuilding and recovery process has been made much harder, and the tragedy much worse, by the hard line approach that was taken by some insurers … it’s cold-hearted and shocking.”