The National Insurance Brokers Association (NIBA) has published a practice guide on cash settlements for property insurance claims, detailing the responsibilities brokers carry when helping clients decide whether to accept a lump-sum payout over insurer-managed repairs.
The guide, released September 22, 2026, arrives as the practice faces scrutiny from Australia’s corporate regulator. About two-thirds of home building insurance claims in Australia now include a cash component, according to the Australian Securities and Investments Commission (ASIC).
When a property claim is lodged, insurers can settle in one of two ways: by arranging and managing repairs through their own contractors, or by paying the client directly – a cash settlement – and leaving the client to manage the works.
NIBA’s guide frames the broker’s task as more than checking whether the dollar figure is acceptable. “A cash settlement does more than change who manages the repairs – it changes who is responsible if things do not go to plan,” the guide states.
When the insurer manages repairs, it carries responsibility for cost overruns, additional damage found during works, and the quality of the finished result. When a client accepts a cash settlement, those responsibilities shift to them.
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The guide identifies several categories of risk that transfer to the client upon accepting a cash settlement. Repair costs can rise between settlement and the start of works. Hidden damage – including asbestos, structural defects, or water ingress – may not surface until demolition begins. Changes in building regulations, such as revised Bushfire Attack Level (BAL) requirements following a bushfire, can also push rebuilding costs beyond the original figure.
Clients who engage their own contractors lose the insurer’s quality guarantee. The guide advises brokers to confirm that any contractors hold appropriate licences, insurance, and warranties, and that all documentation is retained.
Cash flow is another concern. Builders commonly require deposits or progress payments before completing works. If costs exceed the settlement, the client funds the gap.
The guide also raises future insurability: repairs not completed to required building standards, or carried out by unlicensed contractors, may affect a property’s insurability or available cover going forward.
The guide asks brokers to consider whether clients may be in a vulnerable position when a cash settlement is on the table. A major loss event – fire, flood, or storm – can leave policyholders displaced, distressed, or under financial pressure.
“A client does not need to identify themselves as ‘vulnerable’ for additional support to be appropriate,” the guide states, noting that a client’s circumstances, behaviour, or the information they share may signal a need for extra time or assistance.
This concern is reflected in findings from ASIC’s August 2026 review of cash settlement practices, which examined claims arising from Cyclone Jasper and subsequent industry updates. Four of five insurers in the review failed to adequately support vulnerable consumers, with indicators of vulnerability missed in some files and information not consistently shared with third parties involved in the claims process.
ASIC commissioner Alan Kirkland said insurers need to be vigilant that settlement assessments reflect the true cost of repairs. “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,” Kirkland said.
The review found that in 52% of Cyclone Jasper claims, insurers relied on a single quote to make their cash offer. Of those single-quote offers, 73% came from preferred suppliers that typically discount their pricing for insurers in exchange for repeat business – meaning those rates may not reflect what a consumer would pay in the open market.
ASIC cited one case where a preferred builder told a consumer it had undercut its own costs by 40% for the insurer. After the consumer lodged a complaint, the insurer raised the offer by 16.5% plus an additional 20% contingency. No insurer in the review consistently applied such a loading from the outset.
NIBA’s guide outlines benchmarks brokers should use when reviewing an offer on a client’s behalf. These include whether the amount is sufficient at current building costs, whether the scope of works captures all insured damage, and whether allowances have been made for regulatory upgrades under current building codes.
The guide also flags GST: brokers should confirm whether the settlement includes GST and how the client’s registration status or input tax credit entitlement affects the amount payable.
For home building claims, insurers subscribing to the General Insurance Code of Practice are required to provide a Cash Settlement Fact Sheet explaining how the settlement figure was calculated. NIBA instructs brokers to obtain a copy, review it with the client, and seek clarification where the assessment is unclear.
The guide is clear on where brokers stand: they act for the client, not the insurer. In practice, that means independently assessing the settlement amount, reviewing the scope of works, negotiating with the insurer where appropriate, and recommending independent expert advice – a builder, quantity surveyor, or engineer – where the complexity of the claim warrants it.
The guide notes that brokers do not take a percentage of the settlement, unlike some claims management services, leaving the client’s available funds intact.
NIBA-commissioned research by CoreData, published in 2026 under the title Complexity to Clarity: The Broker Advantage, found that 98% of claims with a broker involved were ultimately resolved, and 91% of clients said their broker’s involvement improved the claim outcome.
Read next: Cash settlement pricing is the problem, not cash settlements
The Insurance Council of Australia (ICA) is undertaking further engagement before submitting the redrafted General Insurance Code of Practice to ASIC for approval later in 2026. The June 2026 consultation draft proposed making key insurer obligations legally enforceable as part of consumer insurance contracts for the first time, subject to ASIC approval, while also strengthening requirements around cash settlements.
The NIBA guide reflects information current as of July 2026.
