Australians whose homes have been affected by the bushfire crisis are being warned to steer clear of potential exploitation with their insurance claims from insurance claims management services and dishonest tradespeople.
The Insurance Council of Australia (ICA) reports that insurers have received over 13,750 bushfire related claims since November 8, totalling an estimated $1.34 billion.
The Consumer Action Law Centre (CALC) has concerns that insurance claims management services are targeting homeowners in the aftermath of the ongoing bushfires.
Insurance claims management services are for-profit businesses that sign up policy holders and undertake the administrative work on an insurance claim, taking a percentage of any cash settlement offered by the insurance company.
In addition, the Australian Securities and Investments Commission (ASIC) is warning consumers and small business owners to watch out for dishonest tradespeople, repairers or firms offering to assist them with their insurance claim.
ASIC commissioner Sean Hughes says: “They may claim to be able to identify damage to your property, sometimes by way of a free inspection. Be wary of anyone who asks for payment up front and who asks you to sign a contract immediately. Don’t agree to sign anything which prevents you from dealing directly with your insurer, broker, financial adviser or lawyer.”
The ICA has developed an online register for reputable tradespeople to assist in property repairs and rebuilds which is accessible to the public.
If using a claims management service, the Consumer Action Law Centre suggests consumers check that a cash settlement is in their best interest rather than the claims management service’s.
Cat Newton, senior policy officer at the Consumer Action Law Centre says: “People are right to be wary. The fundamental conflict of interest borne of charging fees to manage insurance claims can lead to poor outcomes for the people these companies promise to help.”
A cash settlement is not always the best outcome as the claimant can lose the option for the insurer to carry out the works (which often comes with a guarantee) and manage the repair process.
ASIC’s Hughes says: “If you’re affected by the bushfires, ASIC suggests you deal directly with your insurer or an authorised, trusted insurance broker or financial adviser. Your insurer may be able to provide emergency accommodation and financial support as part of your claim.”
Consumers need to be aware that insurance claims management services are not regulated and are not members of any external dispute resolution scheme like the Australian Financial Complaints Authority.
Patrick Veyret, policy adviser at CHOICE says: “There are no qualifications, training or skill requirements for operators in the industry. This leaves people incredibly vulnerable to the service placing their commercial interests above the policyholder’s best interests.”
The Government is currently consulting on legislation to implement the Hayne Commission recommendation 4.8 to make insurance claims handling a financial service.
Karen Cox, chief executive of the Financial Rights Legal Centre is calling on the government to regulate claims handling in the legislation.
Cox says: “Royal Commissioner Hayne made it very clear in his recommendation that there should be no exemptions from the law, yet here is a perfect example of where business that aren’t regulated are causing serious problems for consumers. Such poor drafting of legislation simply leaves loopholes for unethical businesses to exploit.”
Instead of undertaking the services of an insurance claims manager, consumers are encouraged to seek out free, not-for-profit financial counselling services such as the National Debt Helpline.
Fiona Guthrie, chief executive of Financial Counselling Australia says: “We know from experience that it can take two years, and sometimes more, for people to recover from natural disasters. Financial counsellors can provide the advice and support over the long term to ensure that people who are traumatised, and their communities, can recover.”
Last week the Government announced a $10 million grant to the National Debt Helpline and $15 million to provide 60 new rural financial counselling jobs.
Financial counsellors provide advice on things such as whether people should accept cash settlements from insurance companies and ensuring people know their rights.
In addition, they can assist farmers and farm-related businesses understand their financial position, the viability of their business and negotiate with creditors.
Guthrie says: “The extra support announced for the National Debt Helpline is vital, with the service already starting to receive calls from people affected by the bushfires. The funding will also support local providers to deliver face-to-face services, including through outreach.
For Australians who want to engage in insurance claims management services, Financial Rights Legal Centre recommends asking for the fee and how they calculate it before providing payment details, asking what happens if the claim is unsuccessful, asking for their experience and qualifications and getting a written scope of the work they will carry out.
The ICA register collects information such as including the town or region in which the builder or tradesperson operates and available skills and qualifications.
The register will be publicly available for use by insurance companies to source additional tradespeople for property rebuilding and repairs. It will also be available to residents, businesses and government agencies who are seeking tradespeople.
Karl Sullivan head of risk and operations at ICA says: “Employing and contracting local professionals and suppliers during the rebuilding phase of bushfire recovery is an essential component in ensuring the economic viability of communities, including the preservation of jobs and supporting local businesses and service providers.”