Under-insurance leaves many owners in the lurch

Only 87 development applications have been received by council from fire victims seeking to rebuild, and the mayor fears it is because so many can’t afford to because they were inadvertently under-insured.

Susan Templeman at the site of her former home in Winmalee.

Susan Templeman at the site of her former home in Winmalee.

More than 200 homes were lost in the fires and Clr Mark Greenhill said many people had found that their insurance won’t cover the additional costs imposed by tougher regulations in fire-prone zones.

“These are people in our community who felt they were, in good faith, well insured but find they were not so because of bushfire regulations,” Clr Mark Greenhill said.

“They have a right to feel pretty upset when they find that the cost - up to $200,000 extra - isn’t legally covered.”

Council has agreed to write to the Insurance Council of Australia (ICA) seeking its support on behalf of under-insured residents. 

Clr Greenhill said the insurance companies “point the finger at the state government or the local council and don’t take responsibility themselves”.

“Insurers have known since 2009 that this is an issue. The Warrumbungles [Coonabarabran] and the Tasmanian fires - they knew then and they didn’t advise a single policy-holder [about additional costs].”

One affected resident, Susan Templeman (also the former ALP candidate for Macquarie), who lost her home in Winmalee, believes the problem is widespread.

“My calculation is that here in Emma Parade, less than a third of people have found themselves in a financial position to rebuild on their old block, thanks to unintentional under-insurance.

“This is not one or two people doing the wrong thing, this is a problem with the system, and a failure by insurance companies and the NSW Government to adequately educate people about the real costs of rebuilding, particularly if you find yourself in a flame zone or BAL 40 zone,” she said.

“The most important thing we can do as people who are living with the consequences of the current system is to try and get it changed so other communities are not torn apart like ours is being, when they are hit by fires.”

Clr Greenhill said he had heard figures of perhaps 30 per cent of residents not rebuilding.

“This is not good enough. It’s obscene that people who felt that were covered are not and we should not accept it,” he said.

A spokeswoman for the ICA said: “Local governments are best equipped to inform ratepayers about changes to bushfire zonings and building codes, and the impact this might have on building costs, as these fall under their area of responsibility and authority.”

The NRMA’s Mariana Cidade said the company regularly encouraged people to check and update their insured sum and offered an online calculator to help policy-holders estimate potential costs.

NRMA believed there was a “shared responsibility between councils, home owners and the insurance industry” to ensure people are adequately insured.

Allianz Australia’s general manager of corporate affairs, Nicholas Scofield, said the issue of rebuilding costs was “a complex matter driven by the upwards of 1000 local councils across Australia that would each administer the current fire-related building codes in various ways”.

“Allianz is not privy to the existing process by which each of these councils advise residents regarding new building standards or even if councils provide any such notice.

“If not standard practice today, it certainly would seem that this should be considered a basic and fundamental council obligation.”

But Clr Greenhill responded angrily: “It is disgraceful that insurance companies would push this on councils.

“These are state government codes and the insurance companies are federally regulated.

“The truth is our council has had no role in these codes. It is some of the insurance companies who are leaving our people in the lurch. Instead of buck-passing they should just pay up.

“I will not let this go.”

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