REP 54 Getting home insurance right: ASIC's report on home building underinsurance
Released September 2005.
This report identifies the following reasons for consumers being underinsured:
- Standard home building policies in Australia place the burden of estimating rebuilding costs on the consumer (unlike policies in some other countries). This is an intrinsically difficult task, requiring technical knowledge.
- Consumers place great reliance on their insurer for help in estimating rebuilding costs. However, only a small number of insurers provide consumers with access to reliable or comprehensive tools for estimating the cost of rebuilding their home.
- Consumers and insurers may not increase the sum insured over time to keep up with changes in building costs generally, or consumers may not increase their level of cover after renovating the home.
- Home building policies are complex and difficult for consumers to compare, so that they may not appreciate the extent to which they may be underinsured due to variations in the cover offered by different insurers.
- Consumers may make a choice (whether adequately informed or otherwise) to accept a degree of underinsurance on their home.
This report presents findings and recommendations on underinsurance based on our research. The appendices to the report provide additional information.