22 June 2018
I am very pleased that the treatment of Wye River bushfire victims insured with AAMI Insurance, owned by Suncorp, has been selected as a case study to be examined by the Hayne Royal Commission.
This was a devastating bushfire which claimed 116 homes in Wye River and Separation Creek. It was a miracle that no lives were lost.
These homes were covered by a Complete Replacement Cover insurance policy.
AAMI claimed this insurance guaranteed that any home destroyed would be rebuilt, no matter the cost, alleviating the risk of a policy holder being under-insured.
But AAMI failed to provide sufficient funds to rebuild six homes destroyed in the 2015 Christmas Day bushfires, undercutting the cost of rebuild by as much as half a million dollars per house.
The policy was fundamentally flawed because of the improper way in which AAMI assessed the rebuild costs. It refused to use architects and other appropriate experts and many of the costs associated with rebuilding on steep terrain, such as for engineering and foundations, were excluded.
In my view, AAMI deliberately short changed home owners which was unjust and heart breaking including for Mark Strachan of Geelong.
I spoke out very strongly in the media and in the Parliament and the Minister for Revenue and Financial Services, Kelly O’Dwyer, directed ASIC to conduct an inquiry.
While justice was eventually done with AAMI agreeing to negotiate acceptable payouts, its inquiry under former chair Greg Medcraft was a whitewash.
Today, when I raised this issue at the public hearing into ASIC conducted by the House of Representatives Standing Committee which I chair, I was disappointed with ASIC’s response. While it found that AAMI Insurance had misled consumers and fined AAMI accordingly, I do not believe that ASIC ever appropriately addressed AAMI’s conduct.
ASIC stated today that it did not have jurisdiction in relation to insurance claims assessments. If changes in the law were required, why didn’t ASIC say something at the time?
Insurers should not be allowed to get away with ripping off consumers, as AAMI attempted to do, particularly those people who suffer loss and trauma in a natural disaster.
It is incumbent on ASIC to take the strongest possible action as soon as possible, including speaking out, in order to ensure insurance companies and other financial service providers are properly held to account.
This is critical is building consumer confidence and trust in our regulator.
22 June 2018