Insurer's Compensation for Fire-Damaged Property Sparks Controversy

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

A property owner’s attempt to increase his fire damage compensation has been thwarted after admitting to deliberately underinsuring his property to cut costs.

The controversy has highlighted potential pitfalls for homeowners seeking to reduce insurance premiums.

Hollard Insurance had initially declined the claim following a fire in October 2021, pointing to non-disclosure issues. However, upon the homeowner's appeal to the Australian Financial Complaints Authority (AFCA), the insurer revised its stance.

Hollard agreed to settle the claim with a payment of $415,937, allocating $300,437 for the building damage and $12,875 for contents, in addition to payments for temporary housing, non-financial loss compensation, professional fees, and accrued interest.

Despite this, the property owner contended the settlement was not fair, arguing his home and belongings were underinsured. Hollard defended the settlement, noting it was still higher than the policy’s insured amounts of $240,350 for the home and $10,300 for the contents.

The homeowner had purchased the policy through his bank, which acted as an authorised representative of the insurer. He claimed the bank's employee had provided financial advice without adequately understanding his financial situation or reviewing his personal circumstances. Additionally, he mentioned not receiving the policy documents.

In its ruling, the AFCA stated that based on the information provided, there was no substantial evidence that the bank's representative offered personalized advice.

“Though the complainant suggested that the representative promised to handle all the coverage details, the panel did not find sufficient proof that personal advice was given,” noted the AFCA.

The authority further emphasized that during an interview with the insurer, the complainant had confirmed receiving and reviewing the policy's product disclosure statement and insurance certificate, thus acknowledging the insured amounts and the underinsurance to reduce premiums.

“I didn’t foresee this type of incident happening, so I underinsured some things to pay a lower premium,” admitted the complainant.

With this acknowledgment, the AFCA supported the insurer's position to settle based on the confessed amount.

Furthermore, the AFCA dismissed the complainant’s request for additional legal fees amounting to $27,500, over and above the $5,000 already provided by Hollard. The complainant claimed that his cognitive impairment made self-representation unfeasible.

But the authority concluded that there was inadequate evidence to substantiate the extent of his cognitive impairment and asserted that Hollard had justifiable reasons to scrutinize the claim, leading to legal expenditures.

Published:Sunday, 4th Aug 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Introducing Backd: Affordable Insurance for Casual and Contract Workers

15 Mar 2026: Paige Estritori

In a significant move to address the insurance needs of Australia's growing casual and contract workforce, TAL has partnered with global insurtech company Cover Genius to launch Backd. This innovative digital-only insurance product aims to provide accessible and affordable life and income protection coverage to workers who have traditionally faced challenges in obtaining such protection. - read more

Zurich's Home Loan Protection: Tailored Insurance for Mortgage Holders

15 Mar 2026: Paige Estritori

Zurich has unveiled its Home Loan Protection (HLP) product, a new insurance offering that combines life and income protection benefits tailored specifically for mortgage holders. This innovative cover automatically adjusts its premiums as the insured's mortgage balance decreases, ensuring that policyholders are only paying for the coverage they need. - read more

Australian General Insurance Premiums Set to Surpass $144 Billion by 2029

15 Mar 2026: Paige Estritori

The Australian general insurance industry is on a trajectory for substantial growth, with direct written premiums (DWP) projected to exceed $144 billion by 2029. This forecast, provided by data and analytics firm GlobalData, reflects a compound annual growth rate (CAGR) driven by increasing demand for coverage in response to the rising frequency of natural disasters. - read more

Australia's A&H Insurance Sector Set for Steady Growth

15 Mar 2026: Paige Estritori

Australia's accident and health (A&H) insurance sector is on track for significant growth, with projections indicating an annual increase exceeding 4% through to 2030. This positive outlook is largely attributed to advancements in digital distribution channels and escalating health-related expenses. - read more

ASIC Probes Transparency in Motor Insurance Pricing Practices

15 Mar 2026: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has initiated a comprehensive review into the accuracy and transparency of motor insurance pricing practices. This move aims to ensure that insurers are adhering to legal disclosure requirements and providing clear information to consumers. - read more