AFCA Rebukes IAG Over Mismanaged Flood Damage Claim
AFCA Rebukes IAG Over Mismanaged Flood Damage Claim
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Insurance Australia Group (IAG) has been mandated to reexamine a denied claim and offer compensation to a driver whose "vulnerable status" was overlooked.
Following a flood incident in remote Northern Territory, the driver submitted a claim on March 9 last year after his car was trapped in the floodwaters. He was transporting a friend to retrieve her vehicle when the floodwater immobilized his Holden Commodore, valued at $32,000.
The driver reported significant water intrusion into the vehicle, compromising its engine and electronics. He and his passenger needed over 15 minutes to push the vehicle out from the water.
IAG arranged for the car to be transported to Darwin for inspection. In June, the mechanic’s report indicated no water damage to the engine or interior, yet traces of water were discovered in its oil.
Another mechanic’s assessment found no water in the air filters or throttle but noted rust corrosion, indicative of water presence.
Due to the claim being filed six days after the policy initiation, IAG flagged the claim's legitimacy and handed it over to their fraud investigation unit. The unit interviewed both the driver and passenger and demanded multiple documents, including mobile records, a car purchase contract, and service history.
According to the Australian Financial Complaints Authority (AFCA), the driver submitted all requested documentation with the exception of his bank statements. Unfortunately, his mobile phone records were not provided in the correct format.
The insurer contended that further investigation was contingent on receiving all requested information and upheld their decision to decline the claim pending additional data.
However, AFCA challenged IAG’s stance, arguing the driver had sufficiently complied with the investigation despite the missing documentation. The authority stated that evidence from the two expert reports supported the driver’s account of events.
The authority emphasized the presence of water in the vehicle, citing the seized engine, evident corrosion in all cylinders, the presence of surface rust, and the milky oil in the oil filter, all hinting at water contamination.
Additionally, AFCA criticized IAG for not recognizing the driver’s vulnerability, stemming from his remote residence, financial duress, and health issues, including a broken leg.
AFCA noted that the insurer's mishandling of the claim had caused avoidable stress and delays for the driver. Consequentially, IAG was compelled to pay a penalty of $5400 for non-financial losses.
"The insurer should either properly execute its investigation or make a claim decision based on the available information," AFCA stated. "Unreasonable demands for additional information have resulted in undue stress for the claimant. IAG must compensate him for the resulting inconvenience and emotional distress."
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
In the Australian beauty industry, professionals such as beauticians, hairdressers, and salon owners are facing significant challenges due to escalating insurance premiums. This trend is largely attributed to a lack of competition among insurers, leading to higher costs and limited options for coverage. - read more
As of May 1, 2026, Australian Football League (AFL) players will no longer have insurance coverage for brain injuries under their superannuation policies. This change comes after Zurich Insurance decided to exclude total and permanent disability (TPD) benefits for claims related to traumatic head injuries, concussions, chronic traumatic encephalopathy (CTE), post-concussion syndrome, or any neurological impairments linked to brain injury. - read more
Dynamic Insurance Services has filed a competition lawsuit against Steadfast Group, QBE Insurance, and Allianz Australia Insurance, alleging that these companies engaged in coordinated conduct that effectively cut off its access to essential insurance products. The lawsuit, filed in March 2026, claims that Steadfast terminated its network agreement with Dynamic in early 2026, followed by QBE and Allianz ending their arrangements. This sequence of events led to the loss of authorized representatives and significantly impaired Dynamic's ability to operate effectively. - read more
The Australian Prudential Regulation Authority (APRA) has announced significant reforms to the capital treatment of longevity products, including annuities, aimed at bolstering the sustainability and affordability of retirement income products. These changes are set to take effect from 1 July 2026. - read more
Recent findings from the Life Insurance Code Compliance Committee (Life CCC) have revealed a significant increase in delays related to income protection and Total and Permanent Disability (TPD) claims processing. Violations of the industry's standards on timely income protection payments have surged by 67% in the 2024-25 period, raising concerns about the efficiency and reliability of insurers in supporting claimants during critical times. - read more
Household insurance is a type of coverage that protects you against financial losses from events such as theft, fire, or natural disasters. It typically includes two main components: building insurance, which covers the structure of the home, and contents insurance, which covers personal belongings within the home. - read more
Welcome to the comprehensive guide on navigating the diverse world of insurance in Australia. Whether you're safeguarding your personal assets or protecting your business interests, insurance plays a pivotal role in financial security. In this introductory section, we'll explore why budgeting for insurance is crucial for Australians, delve into the various types of insurance available, and illustrate how insurance should integrate into your broader financial planning strategy. - read more
Household insurance is a crucial safety net for both homeowners and renters in Australia, offering protection against a range of potential damages and losses. Navigating the insurance claims process, however, can often be challenging and fraught with pitfalls. - read more
Embarking on the journey of homeownership is a landmark event full of anticipation and dreams. As Australians, we cherish the sanctuary of our homes against the backdrop of our incredibly diverse and sometimes unpredictable climate. However, with this excitement comes a significant responsibility—protecting your investment with the right home insurance. - read more
Comprehensive household coverage, often referred to as home insurance, is a policy designed to protect your home and its contents against a wide array of risks. This type of coverage typically includes protection against natural disasters, theft, vandalism, and various unforeseen events. In simple terms, it's the safety net that ensures peace of mind should the unexpected happen to your property or possessions. - read more
Knowledgebase
Exclusion: Specific conditions or circumstances for which the insurance policy does not provide coverage.
No comments yet. Be the first to share your thoughts.