Insurers hiding behind anti-levy campaign, say lawyers

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8 February 2010

A year on from Victoria’s tragic Black Saturday bushfires, a coalition of consumer groups says insurers need to take their share of the blame for underinsurance.

Spokesman Denis Nelthorpe says the industry’s call for abolition of the fire services levy (FSL) overlooks the fact that most bushfire-affected homeowners already had insurance cover. Black Saturday non-insurance has been estimated at 30%.

Mr Nelthorpe, a lawyer from Melbourne’s West Heidelberg Community Legal Service, says the industry did little to move homeowners from sum-insured policies to full-replacement policies before last February.

“One of the biggest problems facing those who lost their home in the fires has been struggling to rebuild after finding out their sum-insured policy grossly under-estimated the cost of replacing their home,” he said.

This is in spite of the Australian Securities and Investments Commission’s 2005 report into the Canberra bushfires that revealed how homeowners ended up underinsured after they relied on their insurer to decide how much to insure their home for.

“The issue hasn’t received much attention in the case of the Black Saturday fires because to date those affected have often received bushfire appeal fund payments, which have helped to cover the shortfall,” Mr Nelthorpe said in a statement.

“Taxpayers and donations are subsidising the profits of insurance companies that should have covered these homes for replacement value in the first place, a fact the insurance industry has been well aware for some time.”

The Insurance Council of Australia (ICA) declined to comment on the basis that Mr Nelthorpe’s views represent a specific case.

ICA did, however, forward a copy of its response to the 2009 Victorian Bushfires Royal Commission discussion paper on the FSL and insurance.

It calls for the present FSL scheme to be abandoned in favour of one that applies to all property-owners.