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.
Berkshire Hathaway Specialty Insurance (BHSI) has announced the promotion of Anna Spink to Head of Marine, Australasia. This strategic move underscores BHSI's commitment to bolstering its marine insurance operations across the region. - read more
Quay Marine Insurance has been appointed as a Coverholder for XL Insurance Company SE (XLICSE), a subsidiary of AXA XL, marking a significant milestone in its mission to provide tailored marine insurance solutions across Australia. - read more
Insurance Australia Group (IAG) has reached a confidential settlement in the $4 billion lawsuit initiated by Greensill Bank AG and its insolvency administrator. This legal action stemmed from disputes over insurance coverage related to Greensill's financial products. - read more
A recent analysis by Macquarie has revealed a significant decline in the domestic business package market share held by Australian insurers, dropping to approximately 48% in the fiscal year 2025 from nearly 67% a decade ago. - read more
Suncorp has successfully secured up to AU$2.4 billion in reinsurance protection over five years, leading to a significant 10% increase in its share value. This strategic move is expected to bolster the company's fiscal 2026 growth outlook, with projected gross written premium growth of 3% across its Australia and New Zealand operations. The reinsurance arrangement, effective from June 30, is designed to cap natural hazard costs in approximately 90% of scenarios, thereby reducing earnings volatility. - read more
Experiencing damage or loss to your home can be a stressful and overwhelming experience. However, having home insurance provides a safety net for homeowners who need to file a claim. - read more
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
Home insurance serves as a critical safety net for homeowners, providing peace of mind and financial protection from unexpected events. In Australia, where Mother Nature’s whims can often result in extreme weather conditions, securing a robust home insurance policy isn't just wise—it's practically a necessity for safeguarding one of life's biggest investments. - read more
Home and Contents Insurance is a type of insurance policy that covers any damage or loss that may occur to your property, as well as the contents within it. This can include damages caused by fire, flood, theft and other unforeseen circumstances. In Australia, Home and Contents Insurance is of utmost importance due to the increasing rates of natural disasters such as bushfires and floods. - 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
Knowledgebase
Liability Insurance: Insurance that provides protection from claims arising from injuries or damage to other people or property
No comments yet. Be the first to share your thoughts.