More property owners than previously thought are failing to purchase building insurance, while property owners continue to be confused over what their policy covers and what the biggest risks actually are.
Research from insurer
QBE in its property market-focused Barometer 2014 found that only four in five (or 82%) of mortgagors have purchased building insurance, which drops to an even smaller 74% when that mortgagor is a first home owner.
QBE's report said this rate of non-insurance for mortgagors is substantially higher than that reported by the ICA in 2013, when the ICA found that one in 25 homeowners did not have building insurance.
The insurer suggested this was because mortgagors are less likely to have insurance than outright home owners, which were included in the ICA's findings.
QBE said that the worrying level of non-insurance among property owners was not a factor of income level, and was therefore not necessarily linked to availability of funds to purchase insurance. Instead, the insurer linked underinsurance to misconceptions about insurance claims and risk exposure.
"Almost half (45%) of insured respondents have made a claim on their home and contents or landlords insurance, with the most common claims being for water damage due to storms (30%) or floods (28%)," the report said.
"However, when asked which insurance events are most important, water damage ranked well behind fire and theft in importance."
Fire was rated as the most important risk by 37% of claimants for home, contents and landlord insurance, though only 10% had actually made a fire claim. Meanwhile, floods were rated as important by only 12% of claimants, the same as storm damage.
"This suggests as
ASIC inquiries have found that consumers don't adequately understand the need for and types of water damage insurance for their property," the report said.
QBE has suggested that mortgagors should be offered insurance at the time of their property purchase by their financial institution, with only 35% of all mortgagors recalling being offered insurance.
In good news for brokers of insurance, only 28% of mortgagors had actually chosen to take out building insurance with their mortgage institution at the point of sale, with the main reasons for shopping elsewhere being uncompetitive pricing (33%) and wanting to keep banking and insurance separate (27%).
