Gypsy O’Dea and her family’s six-year ordeal began with a relatively minor insurance claim that turned into a litany of delays, miscommunication and questionable rectification works, causing catastrophic damage that exposed them to dangerous mould.
“For the first couple of years, we stayed in the house,” Ms O’Dea told ABC News.
“Then we started to lose rooms to mould, with the two older kids sleeping in the playroom and the younger one in our room.”
By December 2019, the walls were rotting, the carpet had mould underneath it and there was a bug infestation.
The claim was with RACV insurance, which is sold through a subsidiary of IAG — the country’s biggest general insurer.
In late 2020, four years after Ms O’Dea’s claim was lodged, a report prepared for the insurer found the home was not recommended for continued occupation due to the “high level of airborne mould spores”.
Instead of the family being informed of the risks and put in temporary accommodation, Ms O’Dea says they were told the house was safe, which was inaccurate.
“They told me it was safe and I had an asthmatic child,” she said.
They stayed in the house for another three months, unaware the house was unsafe and a danger to their health.
The extended exposure to the mould-infested house left Ms O’Dea with a hypersensitive immune system, triggering anaphylactic reactions and hospital visits.
When the insurer finally agreed to move them to temporary accommodation, the furniture and other home contents were moved to storage. Ms O’Dea said she told them repeatedly to make sure it was properly stored and treated to remove any airborne mould spores.
“We lost everything because of their storage failure,” she said.
When she put in a claim to get it replaced, she said RACV insurance told her she was underinsured.
She said it was only when she threatened to make a negligence claim that it agreed to compensate her.
“I spent thousands of hours of my time emailing, phoning and trying to negotiate over six years,” she said.
After six years and two months, the house was finally repaired but the family decided to sell. “We couldn’t go back there,” she said.
In response to a series of questions, IAG said it was an “error” not to review the mould report when Ms O’Dea called in late 2020.
“The report should have been reviewed, communicated to Ms O’Dea and actioned by our property assessor and temporary accommodation arranged at that time,” it said.
It said the assessor was reprimanded, IAG apologised and it provided the family with temporary accommodation and paid some compensation to acknowledge the impact of the error.
In response to the damage done to home contents, IAG said it required removalists and restorers to handle all belongings with care.
“Unfortunately, items were damaged during this process and regrettably, this included sentimental items,” it said.
In addition to the claim settlement for the water and mould-damaged contents, the insurer provided a further payment to cover the damage to items that was caused by removing and storing the contents.
“We know aspects of this claim did not meet our obligations under code 70 of the General Insurance Code of Practice and we logged the breach in relation to this matter,” IAG said.
Complaints at a record high
General insurers are in the spotlight for many reasons, including premium hikes and affordability at a time when the country is facing a cost of living crisis.
The sector is also being scrutinised by a parliamentary inquiry into its handling of the 2022 floods, chaired by Daniel Mulino, with more hearings this week before a report is released in September.
A column I wrote last week about the inquiry resulted in a torrent of emails to my inbox outlining various dirty tricks employed by the sector to knock back all sorts of insurance claims.
The message is clear: The industry’s delaying and denying of claims and low-balling of cash settlement offers in the aftermath of the 2022 floods wasn’t an isolated situation. The tactics are rife across the sector and policies.
The systemic nature of the problem is reflected in the latest figures by the Australian Financial Complaints Authority (AFCA), which show general insurance attracted the second largest number of complaints, up 50 per cent to a record high of almost 28,000 on June 30, 2023.
AFCA said 89 per cent of the complaints weren’t linked to the floods.
In addition, the General Insurance Code Governance Committee, the body that monitors and enforces insurers’ compliance with the General Insurance Code of Practice, recorded an increase in breaches of the code, with 24 companies reporting 123 significant breaches in 2023, which impacted 4.6 million customers, up from 1.7 million in 2022. It said it reported 86 significant breaches to the corporate regulator, ASIC.
It comes as ASIC confirms it has “active investigations” into insurance claims handling and dispute resolution.
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The problem is getting worse
As premiums increase, profits rise and share prices rocket ahead, consumers are coming forward with harrowing stories of insurance companies delaying and denying claims that relate to fires, floods, travel insurance, mould, and questionable car insurance claim denials.
On Friday two of the country’s biggest insurers — IAG, whose brands include NRMA insurance, RACV insurance, CGU, Lumley and Swann, and QBE, a global player — reported significant increases in profit and strong premiums. IAG, which is trading at a four-year high on the share market, reported a 75 per cent increase in insurance profit for the December 30 half-yearly results to $614 million, with premiums rising.
Global insurer QBE, which is trading at a 10-year high on the share market, almost doubled its insurance operating result for the year. Suncorp, whose brands include AAMI, GIO, Vero and Bingle, will report its financial earnings on February 26.
Lawyer John Berrill, whose law firm specialises in insurance claims, told ABC News that delays in insurance claims and repairs had always been a problem but it was getting worse.
“What we are now seeing is rising numbers of complaints to the ombudsman, AFCA, which is buckling under the strain,” he said. “Complaint wait times are blowing out which reduces the pressure on insurers to resolve complaints before they get that far.”
Mr Berrill said the delays in claims and complaints expose problems with the General Insurance Code of Practice and in particular the inadequacy of sanctions for breaches.
“The fact that insurers lined up to apologise for their conduct in the recent Parliamentary Committee hearing but then walked away without any consequences says it all,” he said.
Beefing up the insurance code to include compensation for code breaches on a case-by-case basis would be an important step to making insurers accountable for their claims handling and would drive badly needed improved behaviour.
As the lawyer for Gypsy O’Dea and her family, Mr Berrill said the case highlighted the importance of accurate communication of the risk of mould. “The consequences can be catastrophic to the property and the people living there,” he said.
In the case of 74-year-old Carol Jasen, who is on the aged pension, the battle began after her home was damaged in the September 2022 Melbourne earthquake.
Ms Jasen lodged a claim but it was denied after the insurer appointed an engineer who claimed the damage was caused by a long-term deterioration of the property, which was excluded under the terms of the insurance policy.
Confident the damage was caused by the earthquake, she then filed a complaint with the ombudsman, who accepted her evidence and stated the insurer was not entitled to the claim. “The first copy of the scope of work didn’t have [a] letterhead and they deleted purposely items,” she said.
Ms Jansen said she had paid insurance premiums for 50 years and hardly made a claim. “They try to wear you down because they don’t want to pay you out,” she said. “The entire industry needs to change.”
‘Things need to change’
The parliamentary inquiry is focusing on the floods but the issues are systemic. There has been a conga line of apologies from the CEOs of the country’s biggest insurers.
The inquiry’s chair, Dr Mulino, told ABC News the sector had admitted in parliament that it needed to lift its game when it came to communication, case management and dispute resolution.
“The large number of claims arising from natural disasters is entirely foreseeable. While we don’t know when or where a particular flood or other natural disaster will hit, we do know that natural disasters will increase in frequency and severity. The insurance industry needs to be prepared for this inevitability and strengthen its systems,” he said.
But as an industry insider, who requested anonymity, said: “Their humiliating mea culpas at the parliamentary inquiry along with the manifest evidence of thousands of poorly treated claimants and complainants constitute multiple breaches of a range of legislative and regulatory instruments.”
For customers like Gypsy O’Dea and Carol Jasen, it should be a clarion call for industry-wide reform and proper compensation.
“There’s no accountability, there’s no regulations to hold them to account,” Ms O’Dea said. “I’m speaking up because things need to change.”
