Australia's corporate watchdog has warned that home insurers are increasingly settling claims with cash payments that may not cover the true cost of repairs, leaving policyholders — particularly those recovering from Cyclone Jasper — to shoulder unexpected expenses.
The Australian Securities and Investments Commission (ASIC) released a report on Monday examining home building insurance claims from Cyclone Jasper, which hit far north Queensland in December 2023. The review covered five major insurers: Insurance Australia Group (IAG), AAI, QBE Insurance, Allianz Australia and Sure Insurance.
Cash settlements dominate
ASIC found that cash settlements — where the insurer pays the customer a sum of money to arrange repairs themselves rather than managing the work — were used in more than 63% of final claims. For IAG and Allianz, full or partial cash settlements accounted for more than 80% of claims.
Most cash settlement offers were based on a single quote, often from the insurer's preferred supplier. In one case, a preferred builder provided a quote at a 40% discount, and the insurer paid out that cheaper amount in cash. ASIC said it was concerned these quotes may not be high enough to cover actual repair costs, as customers are unlikely to receive the same discounts given to insurers.
"The easy option for insurers can be the expensive one for homeowners," said ASIC Commissioner Alan Kirkland. "If the amount falls short, consumers can be left shouldering the cost of repairs and paying the difference out of their own pocket."
Unfair outcomes and vulnerable customers
Kirkland said the findings raise "real questions around the fairness of the offers that are being made to consumers." The review found none of the five insurers systematically recorded why claims were settled with cash, and four had flawed approaches for identifying and assisting vulnerable customers.
Insurers rarely provided consumers with enough information to determine whether a cash settlement was in their best interest. Three insurers did not tell consumers they could change their mind after accepting a cash settlement; two later began doing so.
The report did not identify any breaches of legal obligations, but ASIC said insurers could comply with the rules by ensuring cash settlement offers are based on market prices rather than discounted quotes.
Consumer experiences
Julia Hirning, who was affected by far north Queensland flooding in January 2025, told the ABC she was forced to sell her home after her insurer's cash settlement fell short. Quotes she received for repairs exceeded $300,000.
Pensioner Leon Wirtz is completing final repairs himself after receiving an insufficient cash settlement. In his case, Sure Insurance initially agreed to a scope of works quote, but after Legal Aid became involved, the amount increased to about $314,000.
Industry response
Sure Insurance said it "remains focused on responding to our customers' needs in each and every household." The Insurance Council of Australia noted that "there has been a significant uplift" in claims since Tropical Cyclone Jasper and pointed to the climate crisis and increasing extreme weather, which it said nearly tripled total costs.
Assistant Treasurer Stephen Jones said insurers must ensure consumers have all the information they need when making claims decisions.
ASIC's review comes amid rising home insurance premiums, which have increased by 51% over five years, adding to the financial pressure on homeowners.