Household Insurance Online :: News
SHARE

Share this news item!

AFCA Rebukes IAG Over Mismanaged Flood Damage Claim

AFCA Rebukes IAG Over Mismanaged Flood Damage Claim

AFCA Rebukes IAG Over Mismanaged Flood Damage Claim?w=400
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."

Published:Sunday, 2nd Jun 2024
Source: Paige Estritori

Share this news item:

Insurance News

Impact of Trump Tariffs on Global Insurance Industry Impact of Trump Tariffs on Global Insurance Industry
11 Jul 2025: Paige Estritori

According to Swiss Re’s latest Sigma report, the growth of property and casualty premiums is moderating in both Australia and globally. This moderation is primarily driven by a slowdown in rate hikes. Additionally, the Trump administration's America First trade policy is putting further pressure on the insurance sector. - read more
Navigating Changes in Australia's Life Insurance Advice Landscape Navigating Changes in Australia's Life Insurance Advice Landscape
10 Jul 2025: Paige Estritori

The conversation on the shifting dynamics in Australia's life insurance advice sector featured Zurich Australia's head of adviser channel, Kieran Forde, and Hayes & Co director, Katherine Hayes. They engaged with editor Chris Dastoor to spotlight the current market conditions and future prospects for financial advisers in this domain. - read more
ASIC Challenges Federal Court's 'Fair Term' Ruling ASIC Challenges Federal Court's 'Fair Term' Ruling
09 Jul 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) is appealing a Federal Court decision regarding the wording of a 'pre-existing condition' clause in certain HCF Life insurance products. The court previously determined that while the wording had the potential to mislead consumers, it did not constitute an unfair contract term under the current laws set out in the ASIC Act 2001. - read more
ICA Advocates for Strata Law Reform in the ACT to Enhance Building Management ICA Advocates for Strata Law Reform in the ACT to Enhance Building Management
08 Jul 2025: Paige Estritori

The Insurance Council of Australia (ICA) is urging the Australian Capital Territory (ACT) to adopt strata transparency regulations, aiming to enhance oversight of building repairs and maintenance by owners’ committees. This call was made during a parliamentary inquiry, where the ICA pushed for measures akin to recent legislative changes in New South Wales. - read more
Tasmanian Government Insurance Proposal Faces Industry Backlash Tasmanian Government Insurance Proposal Faces Industry Backlash
07 Jul 2025: Paige Estritori

The Tasmanian government's recent proposal to establish a state-run insurance entity has drawn significant criticism from key players in the insurance industry. The plan, spearheaded by Premier Jeremy Rockliff, aims to expand the Motor Accidents Insurance Board into a broader service named TasInsure, offering products including home and contents insurance, small business coverage, and more. The RACT, a major player in Tasmania's insurance sector, expressed considerable concern, labelling the initiative as a simplistic answer to complex problems. - read more


Household Insurance Articles

The Most Common Mistakes in Household Insurance Claims and How to Prevent Them The Most Common Mistakes in Household Insurance Claims and How to Prevent Them
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
5 Essential Insurance Policies for Your Home-Based Business 5 Essential Insurance Policies for Your Home-Based Business
If you're running a business from your home, you may think that your homeowner's insurance policy has you covered. Unfortunately, this is not the case. Homeowner's insurance policies are not typically designed to cover business-related losses, leaving you vulnerable to significant financial risks if something goes wrong. - read more
5 Essential Tips to Understand Your Home Insurance Policy in Australia 5 Essential Tips to Understand Your Home Insurance Policy in Australia
Choosing the right home insurance policy is akin to laying a safety net beneath your most valuable investment. With the Australian climate presenting a unique set of challenges, from bushfires to flooding, ensuring you have comprehensive cover isn't just a luxury—it's a necessity. The right policy serves as an armor, protecting your sanctuary against the unexpected onslaughts of nature and misfortune. - read more
Why Australian Households Can't Afford to Skip Insurance Why Australian Households Can't Afford to Skip Insurance
Household insurance is a critical safety net for many Australian families. It protects against unexpected events such as natural disasters, theft, and accidents, ensuring that your home and belongings can be repaired or replaced if something goes awry. - read more
Wild Weather Ahead: Safeguarding Your Property from Storm-Related Damages Wild Weather Ahead: Safeguarding Your Property from Storm-Related Damages
Welcome to our essential guide for protecting your property as wild weather sets its sights on Australia. Catastrophic storms and extreme conditions don't have to spell disaster for your home. Understanding the sheer force of Mother Nature reinforces the importance of consistent preparedness. In this article, we'll arm you with the knowledge you need to stand resilient against the elements. - read more
Why Income Protection Insurance Matters for Every Australian Earner Why Income Protection Insurance Matters for Every Australian Earner
The unpredictable nature of life can often leave us vulnerable to financial uncertainty, especially when it comes to our ability to earn an income. Whether due to illness, injury, or unexpected job loss, the loss of income can have a devastating impact on our financial stability and quality of life. This is where the importance of insurance in financial planning becomes evident. - read more
Household Insurance for Australian Renters: What You Should Consider Household Insurance for Australian Renters: What You Should Consider
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
Essential Tips to Find the Right Home and Contents Insurance for Your Family Essential Tips to Find the Right Home and Contents Insurance for Your Family
In the face of unpredictable climate patterns and wild weather, safeguarding your home becomes a top priority, especially in a country like Australia. Choosing the right home and contents insurance is essential in providing a financial safety net against the forces of nature. With this in mind, the importance of insurance cannot be overstated, acting as a crucial buffer to protect your property and belongings. - read more
Protecting Your Home: The What, Why, and How of Home Insurance Protecting Your Home: The What, Why, and How of Home Insurance
As Australians, our homes are often at the heart of our livelihoods and hold significant emotional and financial value. Protecting this important asset is more than just a precaution; it's a necessary step in safeguarding our future. Home insurance acts as a shield against unpredictable events that can have devastating effects on our property and peace of mind. Whether it's from natural disasters or unforeseen accidents, the significance of home insurance cannot be understated. - read more
How to ensure your home renovation is covered by your insurance policy How to ensure your home renovation is covered by your insurance policy
Renovating your home can be an exciting time, but it can also be a stressful one. There are so many things to consider and plan for, including financing the renovations, choosing the right contractor, and selecting the materials to be used. One aspect that often gets overlooked during planning is the impact that renovations can have on your insurance coverage. - read more


Your free Household insurance quote comparison starts here!
First Name:
Postcode:

All quotes are provided free (via our secure server) and without obligation. We respect your privacy.

Knowledgebase
Peril:
A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or flood.