Key facts
- Home insurers are predominantly using cash settlements for cyclone-damaged homes.
- Asic found cash settlements were used in over 63% of final claims reviewed.
- Many cash offers were based on a single quote from an insurer's preferred builder.
- Homeowners may be left to cover unexpected repair cost increases.
- Four of five insurers had inadequate systems for identifying and helping vulnerable customers.
Home insurers are frequently opting for cash settlements on claims, a practice that is leaving Australian homeowners, particularly those affected by cyclone damage, to bear the brunt of escalating repair costs. The Australian Securities and Investments Commission (Asic) has highlighted this issue, urging for more substantial payouts to prevent "unfair outcomes" for vulnerable individuals.
In a report released on Monday, Asic found that many homeowners receive cash payments based on a single quote, often from the insurer's preferred builders. This leaves consumers responsible for managing the repairs, sourcing tradespeople, and covering any unexpected costs or damage that exceed the initial payout. Asic commissioner Alan Kirkland stated that the insurers' "easy option" can become the costly one for homeowners, potentially forcing them to pay the difference out of pocket.
The review examined a sample of home building insurance claims following Cyclone Jasper in far north Queensland. It focused on major industry players including Insurance Australia Group (IAG), AAI, QBE Insurance, Allianz Australia, and Sure Insurance. Despite insurers professing a preference for managing repairs themselves, the review found that cash settlements were utilized in over 63% of final claims. IAG and Allianz, in particular, employed full or partial cash settlements in more than 80% of their cases.
Most cash settlement offers were based on a single quote, typically from the insurer's preferred suppliers. Asic is concerned that these quotes may not reflect true market prices, as consumers may not receive the same discounts that insurers secure. In one documented case, a builder refused to undertake repairs for the discounted cash amount provided by the insurer. While some insurers offered additional payments to account for supplier discounts, no consistent system was in place to manage this. Furthermore, insurers rarely provided consumers with sufficient information to assess if a cash settlement was truly their best option, with three insurers failing to disclose that policyholders could change their minds after accepting cash.
The report also found that four of the five reviewed insurers had inadequate systems for identifying and assisting vulnerable customers. While no legal breaches were identified, Asic suggested that insurers would better align with regulations by basing cash settlement offers on market prices rather than discounted rates. The report comes amid soaring construction and repair costs, which have driven a significant increase in home insurance premiums. Finity reported a 51% rise in home insurance premiums over the five years to October 2025, outpacing general inflation.