The cash settlement Julia Hirning was offered by her insurer will not cover the scope of works, forcing her to now sell her home. (ABC News: Baz Ruddick)
Australia's corporate watchdog is sounding the alarm over insurers' use of cash settlements, concerned they could unfairly short-change home owners dealing with a house insurance claim.
ASIC has been reviewing the industry's use of cash settlements to pay out claims since the impacts of Cyclone Jasper in Far North Queensland in December 2023.
Ms Hirning was impacted by Far North Queensland flooding in January 2025. (Supplied: Julia Hirning )
Cash settlements provide customers with a full or part sum of money to independently handle building repairs.
It is an alternative to an insurer overseeing rectification work done by their choice of contractors and covering the cost as required.
ASIC's report found at least 63 per cent of final home insurance claims included a cash settlement, with consumers at risk of insufficient funds that do not cover the true cost of repairs.
ASIC warned cash settlements also risk the home owner experiencing the stress of finding reliable tradespeople, and could leave them with no lifetime repair guarantees.
Alan Kirkland says ASIC has questions about the fairness of insurer cash settlements. (ABC News: Chris Taylor)
"These findings are a real concern," ASIC's commissioner Alan Kirkland said.
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ASIC reviewed the policies, procedures, training materials and a sample of claim files from Insurance Australia Group, AAI, QBE, Allianz, and Sure Insurance.
It found most claims involved a cash settlement with little information to determine whether it was in the customer's best interests.
"Insurers ultimately have an obligation to make sure that their cash settlement offers are fair and … they need to communicate with consumers in terms that they understand," said Mr Kirkland.
ASIC's review found that to determine the sum offered, insurers often relied on a single quote from a preferred supplier that was willing to offer discount pricing for the insurers in exchange for repeat business.
