Every insurer in the corporate regulator's cash settlement review told it the same thing: managing repairs is the preferred outcome. The claims data did not agree, and the gap between the two is now a question brokers can put directly to an insurer at the point of offer.
The Australian Securities and Investments Commission (ASIC) found that all five insurers whose files it examined stated a preference for settling claims by managing repairs or rebuilding rather than with cash. A cash settlement is a payment of the assessed repair cost to the customer, who then arranges the work, instead of the insurer arranging it. At least 63% of final home insurance claims nonetheless included a cash settlement, across both Cyclone Jasper and a normal operating period. Two of the five reported using full or partial cash settlements in more than 80% of Cyclone Jasper claims. ASIC did not identify which two.
The pattern is not confined to the review sample. About two thirds of home building insurance claims in Australia now include a cash component, according to the regulator.
The review examined claims arising from Cyclone Jasper, catastrophe code CAT232, which caused significant damage in Far North Queensland in December 2023, along with any updates insurers have made to their practices since.
ASIC Commissioner Alan Kirkland set out what the choice transfers to the customer. "For many homeowners, accepting a cash settlement, instead of the insurer managing repairs, can mean taking on the responsibility of finding tradespeople, overseeing repairs, dealing with unexpected costs and navigating issues that would otherwise be handled by the insurer," he said.
Insurance Business Australia approached three of the five insurers named in the review, along with the Insurance Council of Australia (ICA). Insurance Australia Group (IAG) responded directly. QBE and Allianz both referred Insurance Business to the council, which argued cash settlements give customers speed, choice and control over their own repairs after a disaster, and pointed to industry work on clearer customer information since Cyclone Jasper. Its full response is reported in our coverage of how insurers priced cash settlements at discounts clients could not access.
IAG confirmed the preference and explained the reasoning behind it.
The insurer said its preference is to manage customers' repairs through its national network of partner repairers and their trades, which allows it to provide a lifetime guarantee on workmanship. It said that when customers are affected by severe weather, its priority is safety and immediate support to help them recover quickly.
It then set out the circumstances in which cash is the appropriate outcome.
"A cash settlement may also be appropriate, for example, if a warranty for the repairs cannot be provided due to pre-existing issues with the property, for shared property such as a boundary fence, or where a customer has already paid for repairs to their property," an IAG spokesperson said.
"Where customers choose a cash settlement, or where one is appropriate in the circumstances, we support our customers through this process to ensure the settlement reflects the reasonable cost of repairs under their claim," the spokesperson said.
The first of those scenarios is the significant one, and it is the one ASIC quantified.
Pre-existing property issues are not an edge case in this data. ASIC found that where claims involved pre-existing maintenance issues, insurers tended to offer cash settlements — and that this was particularly true where those issues could not be rectified in a timely manner.
The scale is documented. According to insurers' own data, maintenance exclusions were the underlying reason for a quarter of Cyclone Jasper cash settlements. At individual claim level, half the files ASIC reviewed involved a cash settlement because the insurer had assessed the consumer as not having adequately maintained the property.
ASIC's concern was not that cash is the wrong answer where damage is partly excluded. It was what happened next. In its poor-practice example, an insurer accepted a claim for interior water damage near a number of windows, found pre-existing maintenance issues with the external seal on those windows, and offered cash without attempting to work with the consumer to rectify the maintenance issues first. The customer was left to find their own workers for both the excluded and the insured components.
The better-practice contrast is instructive for brokers, because it is achievable. Another insurer identified roof rust that was not covered under the policy, then offered to obtain a quote for both the insured and uninsured works and to manage all repairs through its builder, provided the consumer paid for the maintenance works. One builder, one process.
That is the ask, and the timing finding makes it sharper. Where an insurer cites pre-existing damage as the reason for cash, the questions are whether it will quote and coordinate the combined scope, and whether a rectification timeframe is what is pushing the claim toward cash in the first place. Both sit alongside the pricing questions raised elsewhere in the review, where ASIC found cash settlements must reflect prices consumers can obtain in the market.
If a stated preference is to mean anything operationally, an insurer has to be able to see when it departs from it. Most cannot.
Only one insurer in the review [all insurers are anonymous in the report data] could readily extract data on the reason a claim was cash settled, and no insurer captured this systematically. Most were unable to readily extract key information on cash settlements from their systems at all, relying instead on manual reviews of individual claim files.
ASIC's position is that insurers not adequately gathering and analysing this data will find it difficult to understand claim outcomes, identify outliers and detect systemic issues. The regulator says all insurers - not only the five reviewed - will be better placed to demonstrate compliance with their legal obligations if they collect detailed data about all cash settlements, enabling systematic monitoring and review of outcomes across portfolios.
One insurer in the review has gone further than data capture. It piloted a programme to follow up with consumers six months after a cash settlement to check on the progress of repairs and the adequacy of the amount. ASIC called the approach proactive, noting it supports good consumer outcomes, helps ensure properties remain insurable, and reduces complaints by monitoring cash settlement results. It is the only example in the review of an insurer testing whether its own settlements actually worked.
For brokers, the practical position is straightforward. A stated preference for managed repairs is a commitment worth testing on each claim, particularly where maintenance is cited. IAG says its aim is a settlement reflecting the reasonable cost of repairs. The reviewed data shows how often the cash route is taken anyway. Claims specialists have been making a related argument for months, on why brokers should pump the brakes on tempting settlement offers.
This is ASIC's third pass at home claims conduct. The findings are consistent with its follow-up work to Report 768, Navigating the storm: ASIC's review of home insurance claims, and echo the recommendations of the House of Representatives Standing Committee on Economics in its October 2024 report, Flood failure to future fairness, on insurers' responses to the 2022 floods, which called for greater detail and clarity for consumers about cash settlements. ASIC has separately told home insurers to fix oversight of independent experts and improve cash settlement information.
