A single mother was “blindsided” when her insurer retracted its offer to provide a new car to replace one stolen by a criminal gang.

The motorist had owned her 2024 Isuzu MU-X for only seven months when it was taken on May 5 last year and “used by an organised crime syndicate”.

She lodged a claim with IAG and, because the vehicle had not been recovered, documents were sent for her to choose a car under her policy’s “new vehicle replacement” option.

However, the Isuzu was then found by police on June 13 and the insurer, after assessment, decided it was repairable.

The claimant was not happy with this and took her case to the Australian Financial Complaints Authority.

“Given the damage caused, the high costs to repair it, time taken and her discomfort with it being used for criminal purposes, the complainant no longer wanted the vehicle,” AFCA said. “She considers it has been compromised to the extent she should no longer have to take it back.”

Related article: Curtains for insurer as AFCA rejects blind spot in coverage

The woman told AFCA the insurer had committed to providing a new vehicle and retracting that offer was unfair.

But the ombudsman has ruled in favour of the insurer, saying the new-for-old option applies only if the vehicle is not recovered or is uneconomical to repair.

“I acknowledge the insurer was preparing to settle the claim by way of providing a replacement vehicle,” an AFCA member said. “However, this changed upon the recovery of the insured vehicle and upon learning it was repairable.

“There is no persuasive evidence it cannot be repaired safely and returned to her.”

However, the insurer should pay $1000 compensation for non-financial loss – which it had already offered – because there was “some confusion” during the claim.

“She is a single parent and highlights incurring registration costs, vehicle loan repayments and insurance costs for a vehicle she could not use over several months,” the ombudsman said. “She believes the stress of this situation has also affected the health and wellbeing of her young son.

“I acknowledge the complainant felt blindsided by the offer to replace the vehicle, which was later revoked. I consider the insurer likely should have handled this better and provided more information to the complainant about the reasons for it.”

See the full ruling here.

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