The people who suffered damage in the bushfires were badly underinsured, both for building and contents.
But only a very small percentage were not insured at all for buildings. The Canberra non-insurance figure was about 1 per cent, compared to nearly 25 per cent in the 1994 bushfires in and around Sydney. Only six of the 500 destroyed houses were uninsured and only four partly destroyed houses were uninsured.
This was because of the charater of the affected suburbs – 30 years old and populated by a higher portion of people in their 50s who have lived in the same place for a long time. They tend to be prudent enough to insure but unaware of the large increases in building costs and the large increases in the costs of replacing old contents with new contents or replacing all the new furniture and other goods that they have brought into the home. Also, most people have to have insurance if they have a mortgage.
However 20 per cent of those affected did not have contents insurance.
The National Co-ordinator of the Insurance Disaster Response Organisation, Christopher Henri, interviewed more than 100 of those afftected and gathered statistics on all of them.
He said there was a lot of underinsurance because people said, “This is Canberra, we don’t have disasters. The worse disaster we have had here has been a change of government”.
He said it was difficult to assess exact amounts of underinsurance.
“However, the degree of non-insurance on dwellings is quite low when compared to the national average. I understand that only about 10 dwelling structures were found to be uninsured. This is a very small percentage of the total of 1200 properties affected by the bushfires. . . .
“However, by contrast the degree of under-insurance on both home buildings and contents was very high. Although insurance companies try to assist their customers in getting the right sum insureds on dwellings and contents in the end the onus is on the property owner to obtain adequate insurance cover. Underinsurance is a disaster that can be avoided simply by getting adequate insurance. Home insurance is so easy to buy and relatively inexpensive.
“The majority of home owners impacted by the fires either for total destruction or fire damage were first-time claimants and this added to their stress and trauma. But insurance companies were prepared for this [from past experience] and brought special teams of claims managers into Canberra to meet with their customers and assist and guide them through the claims process.
“Many people did not know their policies covered them for the costs of temporary accommodation and were relieved to learn this.”
However, the cost of clearing the site – between $5000 and $7000 — was not a separate item and formed part of the total sum insured.
Henri said insurance companies and their customers still had a lot of work to do on getting the sum insured correct.