Insurance Policy & Claim Advice

Do Not Make An Insurance Claim In Australia Without Asking Me First – Especially If You Do Not Understand The Product Disclosure Statement (PDS).

John Kanard
[email protected]
0418-628377
Too many people purchase their Home and Contents, or Business/Commercial insurance policies based far too simply on the almost ubiquitous media advertising insurers use. The marketing strategy is simple; make the product look as simple and as attractive as an ice cream – you see what you want, and like; think you know exactly what the packaging contains; and, it will meet your immediate needs.

I call it the ‘ice cream’ theory.

Unfortunately, it is only when the need arises to make a claim, that the reality of that ‘ice cream’, becomes the terms and conditions of the contract of insurance you bought – without reading or understanding the Product Disclosure Statement (PDS) which contains the terms and conditions of the contract you (bought) agreed to enter into with the insurer.

The PDS contains the insurer’s tools with which they administer the contract, and which describe, ‘in plain English’ what the policy insures; the Insured Defined Events, or Accidental Damage – if the latter is an additional (cost) option; how the policy treats each Insured Defined Event, inclusive of policy limits; what is not insured under each Defined Event, or Accidental damage; what you must, and must not, do if a Defined Event or Accidental Damage happens to your property; as well as many other aspects of the terms and conditions of the policy which the Insurance Contracts Act (ICA) requires the insurer to do in order for the insurance contract to comply with the ICA legislation.

The Insurance Contracts Act came into existence in 1986 in order to protect consumers. The Act has been necessarily amended since its inception, and today includes a definition for ‘flood’ – an issue which continued to cause predictable disputes between insurers and consumers until the Act provided resolution. The Act also requires each party – the insurer and the consumer – to act with the utmost good faith towards each other – Section 13 – as well as to disclose everything which each party relies upon in order to enter into the contract.

The PDS includes details, and definitions, relied upon by the insurer in order to assess and settle claims in accordance with the policy terms and conditions – the duties of utmost good faith and to disclose, are thereby satisfied by the insurer within the meaning of the legislation. So, it is vitally important for consumers – policy holders – to understand their rights, and responsibilities, as policy holders, and the imperative to seek advice if they are in any doubts.

Consumers often rely on Insurance Brokers to manage their personal and business insurance needs. Brokers are not only bound by legislation, but also subject to a professional Code of Conduct. However, many brokers have agreements (binders) with insurers which, for all intents and purposes, may be viewed as eroding the broker’s notional obligation to act in their client’s – the consumer – best interests. The question then arises – who is the broker’s client; an individual seeking advice about their personal/business insurance needs; or, the insurer whose commercial interests may influence the broker’s income.

But, back to the ice cream…

So, you’ve had damage caused to your house by an Insured Event – let’s say a major hailstorm, which the Insurance Council of Australia (ICA) has declared a Natural Disaster. Your house is damaged – the aluminum roof sheeting seems to be damaged; the roof gutters have filled with hail of varying sizes; torrential rain which accompanied the storm was unable to escape the roof guttering and has thereafter flowed into the roof cavity, and then into the house damaging walls and ceilings, ceiling insulation, floor carpets, furniture and fittings, electrical goods and personal belongings. You have your own disaster, but you have insurance !

You ring your insurer, and the long march to recovery begins. What (else) could possibly go wrong ?

Your insurer has a ‘hot line’ for their clients whose lives have been up-ended by the natural disaster, but when you finally speak with your insurer’s call-center person, you are assured an assessor with be appointed, who will contact you as soon as possible to arrange a site visit to inspect and assess the damage. During the conversation you advise the interior of your house is so wet, you are concerned about using electrical equipment, and that every room is soaking wet. Your insurer advises they will contact you very soon about arranging cleaning and drying because you fortunately have Home and Contents insured in accordance with their Defined Events policy. No mention of alternative accommodation is offered; you have not read the PDS prior to purchasing your insurance, or any of the PDS documents you have received since the inception of your policy ten years ago, or before contacting your insurer following the hailstorm.

The very helpful call-center person advised you that you should take as many photographs as possible of the damage you can see or identify, before trying to clean or remove damaged items of contents, so you decide to act as quickly as possible to start trying to make sense of the situation; a phone call your spouse, and calls to the children to alert them of the situation, as well as contacting neighbours to check on them and compare their circumstances with yours.

No time to read the PDS, so you make the best of a very bad situation and continue to clean up and remove water-logged bedding and carpets, drapes, clothing and soft furnishings which seem far too water damaged to be able to salvage any use from them. And, many of those items were over five years old, including two water-logged televisions, a home computer, stereo equipment, and electrical kitchen items. Moreover, two of your neighbours advised you that their insurer said water damage to electrical equipment was virtually impossible to repair, and replacement was the only option.

Two days pass before you receive a telephone call from a person identifying themselves as an insurance assessor appointed by your insurer to assess your claims, as well as to advise your insurer how your policy will respond to the event, and make recommendations about repairing and/or replacing damaged building components, and water damaged contents. The assessor will be there tomorrow, and he has already instructed their building consultant to inspect all building damage associated with the hailstorm and water inundation.

Still no time to dig out that PDS to understand how your Defined Events policy will respond, but you know the Building is insured for $580,000.00 and your Contents for $80,000.00, because you thought those amounts seemed ‘right’ when you received the policy renewal notice. And, after all, your insurer was a large corporation; their advertising was confident and encouraging; and, the helpful call-center person assured you that your Building and Contents are insured.

The assessor and his building consultant colleague arrive the next day, and the assessor speaks with you, at length, about your Defined Events insurance policy, policy limits, and how damage to the house and contents will be handled. The assessor and building consultant variously take photographs and measurements of building damage, and the assessor asks if you have had a chance to make a list of all the water damaged contents you identified. With the exception of wet areas and the kitchen, your house is carpeted throughout with woolen carpet with underlay which was only replaced two years ago, at a cost of $35,000.00 – it was meant to last. To your astonishment, the assessor advises the carpet is considered as part of your Contents; a revelation thereby making your Contents Sum Insured of $80,000.00 look exceedingly anemic.

Meanwhile, the building consultant has completed his inspection and departs, advising the assessor he will provide his report and repair recommendations as soon as possible.

Your mind wanders towards that, as yet, unread PDS. The assessor proceeds to discuss this and that, none of which is making any sense because what you thought your insurance would cover is rapidly being compromised by the assessor’s advice to you about; how his report to your insurer must include observations about the adequacy of your Building and Contents sums insured; how damage was caused; and, the extent thereof.

So, by the time the assessor departs, you are so much more than confused, and the prospect of trying to read, and understand, the PDS seems a bridge far too far away. Your house is no longer your home, but seems like a swamp, and you have no idea where or how you will live until everything is put right…by your insurance.

The above scenario is most certainly not un-common. Water damage following a storm, where water enters a dwelling due to damage caused by a Defined Event, is a routine claim scenario. Likewise, fire damage caused by a Defined Event is routine, but not when the fire or storm or flood events are so extensive they are declared Natural Disasters. So, reading and understanding the PDS which your insurer provides to fulfil their Duty of Utmost Good Faith is an imperative.

And, with business insurance, too often those policies do not insure FLOOD as a standard policy inclusion. Worse, if a business has an insurance policy which includes Business Interruption (also known as loss of profits), and the business is unable to operate due to an uninsured event – FLOOD – the is no insurance for Business Interruption as a consequence.

I have worked for nearly thirty years as a Chartered Loss Adjuster (insurance assessor), and I know the pitfalls of ‘ice cream’ theory.

If you, your family, friends, acquaintances or business colleagues, are stuck with an insurance claim challenge, I may be able to help.



















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