Insurers upgrade home fire claims coverage

08 May 2021

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AUSTRALIA – Major home insurers are updating their terms and conditions to make it easier for homeowners to claim for fire damage.

The move comes in the wake of disastrous bushfires that roared across the east coast of Australia early last year and follows a concerted campaign by consumer advocate Choice for better fire claims definitions for exclusions on home-and-contents insurance policies.

The Insurance Council of Australia says more than $2.3 billion was paid out in claims to policyholders following the bushfires. However, Choice maintains a lack of standardised terms among fire insurers meant many policy conditions were unclear and open to misinterpretation.

An investigation of home-and-contents policies in the wake of the bushfires found 70 per cent contained “confusing, unfair or unclear” fire definitions, according to the advocate.

For example, some policies excluded damage from “heat, soot, smoke or ash”, while others set a seemingly unfair limit of 10 metres on the distance of a fire from a damaged property.

For anyone trying to understand the many exclusions in policy documents or product disclosure statements, it was something of a minefield.

Choice contacted major home-and-contents insurance brands Youi, Budget Direct, Virgin Money and ING and secured commitments from their parent companies to initiate changes to fire damage definitions.

There are still some differences between policies but the more confusing definitions are gone, says Choice senior campaigns and policy adviser Dean Price.

“Some of the old definitions of fire excluded damage caused by smoke, smouldering and melting. These loose definitions provided insurers the scope to deny coverage when your home was damaged by a fire without flame damage.”

Insurance underwriter Auto and General director Jonathan Kerr says the company is extending and clarifying its standard home-and-contents insurance policy terms to cover heat, ash, smoke or soot damage within 100 metres of an insured address. The change will cover all home-and-contents insurance products and brands that Auto and General underwrites.

“The new fire definitions will provide clarity and confidence to customers with home-and-contents [insurance],” Kerr says.

“The improved terms have no impact on the premium our customers pay and, as a result, we have not changed the locations that we offer home-and-contents insurance,” he says.

Youi head of public relations Belinda Zordan says the terms and conditions changes will come into effect for all its home-and-contents policies later this year.

New product disclosure statements will include cover for soot, smoke or damage from flames within 100 metres of a building – up from 10 metres now.

“A key factor that is impacting premiums for all Australian insurers is the rising cost of reinsurance due to the high level of the recent natural disasters,” says Zordan.

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Subsonic music festival director Scott Commens is still battling his insurance company who said he should not have cancelled the 2019 festival amid the horror bushfires.

However, she says any premium increases associated with the latest changes would be “insignificant”.

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