A parliamentary federal standing committee into insurers' responses to claims resulting from recent major floods has heard that insurer behaviour had been "cavalier and combative" towards customers making claims after the October 2022 floods.
Representatives from the Victorian Council of Social Services (VCOSS) spoke at the House Standing Committee on Economics and said insurers continued to push back on customers until they were forced to receive cash payments well below the cost of repairs.
"The message was loud and clear that the insurance system isn't working, and the market failure here is entrenching poverty and making people more vulnerable to future disasters," VCOSS chief executive Juanita Pope said.
"Those who lost their homes and belongings in the Victorian floods told us that insurers pushed back and pushed back again until a person simply gives up.
"And then finally when the insurer does agree that there is flood damage and there should be a payout, we heard they pressure customers to accept a cash settlement which is so low that it doesn't cover the true cost of rebuilding."
Ms Pope said through one on one consultations and via community feedback forum in northern Victoria VCOSS had heard about many instances where insurers kept people in the dark about their claims over many months.
"Insurers should cover customers' full accommodation costs until rebuilding works are completed, rather than leaving them in the lurch," she said.
She said about 60 per cent of homes affected by the October 2022 floods were not insured or under-insured due to a growing costs of premiums and companies withdrawing from covering entire regions because of high risk.
Ms Pope praised the community sector as putting in an "herculean effort" to help with insurance failure.
"In terms of direct support, one financial counselling service we are aware of was able to secure a cash settlement for a low-income client which was eight times of what was originally offered," she said.
Financial Rights Legal Centre senior policy and communications officer Julia Davis said the insurance industry could make "immediate unilateral action" to better resource claims handling and give better support.
"Insurers could today stop denying claims on spurious and vague assertions of a lack of maintenance and wear and tear without evidence or satisfactory explanation," she said.
She also said she had heard many examples of rude and aggressive appalling behaviour from third parties as well after flooding events.
"We see instances all the time where assessors would come to a house and say really conflicting things, that are basically opposite to what the insurer has said, sometimes in a good way, sometimes bad," she said.
"That kind of behaviour needs to get resolved with training with very clear statements of expectation from the insurer about behaviour."
