Fire cover insurance excludes smoke damage

Where there's smoke there's fire, right? Well not in the view of some of Australia's main insurers.

Against the backdrop of a summer in which bush infernos destroyed more than 3000 homes, the federal government will today come under pressure to standardise the definition of fire in home and contents cover.

The push is being led by Choice, which has found big flaws in a quarter of policies.

For example, Youi excludes scorching, melting or smouldering unless there are flames.

Choice says Aami doesn't insure for smoke damage "when the building has not caught on fire unless it is caused by a burning building within 10m of the insured address".

Coles has a similar position, as does Apia.

"These tricky terms are far from the simple expectation that most people have when they take out insurance for fire damage," Choice CEO Alan Kirkland said. He is meeting Treasurer Josh Frydenberg today.

Choice CEO Alan Kirkland. Picture: News Corp Australia
Choice CEO Alan Kirkland. Picture: News Corp Australia

The bushfires that raged from November to February had led to 23,362 claims worth $1.9 billion, the Insurance Council of Australia (ICA) said. About 45 per cent of contents claims and 25 per cent of home building claims have been closed.

Mr Kirkland said it was too early to know if people were having claims denied due to tricky terms. But that was what had happened in some instances after Victoria's Black Saturday bushfires in 2009, he said.

Choice's call for change is echoed by the Australian Competition and Consumer Commission.

"Current practices make meaningful comparisons between insurance products very difficult," an ACCC spokeswoman said yesterday. "The challenges in comparing policies are exacerbated by the proliferation of different definitions used by insurers of the same key terms."

But the ICA says Choice should be encouraging the government to do more on mitigation and resilience, instead of "self-aggrandising".

"This unnecessary and unjustified scaremongering will add to the emotional burden already being shouldered by thousands of bushfire-affected households," ICA communications director Campbell Fuller said.

Mr Kirkland said Choice wasn't saying all insurers were bad - Allianz, ANZ, CGI and Comminsure had clear and fair fire definitions. But others needed to lift their game.

And "if the industry won't even acknowledge there's a problem, the government needs to intervene," he said.


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