Need to know
- Renters around Australia will no longer be pursued by landlord insurers over accidental property damage
- CHOICE and WEstjustice campaigned against the harmful and unethical practice
- Major insurance companies have agreed to change their policies of going after renters
Major insurance companies around Australia have agreed to change their policies of pursuing renters over unintentional and accidental property damage following a joint campaign between CHOICE and WEstjustice.
This unethical practice – where companies that sell landlord insurance chase renters over damage that they didn't cause or that wasn't their fault – was highlighted in several CHOICE investigations.
In earlier articles, we told the stories of renters including Luke Sierakowski and Lauren Arnett, a young couple in Victoria who were given 14 days to pay a bill of almost $78,000. The bill was sent to them by GIO, the landlord's insurance provider, over an accidental kitchen fire.
In another case Pedro, a Mexican migrant based in Sydney, was billed more than $133,000 over a fire that happened in his apartment due to an electrical fault. He wasn't even home at the time.
Unethical and causing harm
CHOICE director of campaigns and communications Erin Turner says the practice of landlord insurers going after renters is one of the most harmful and unfair she's ever seen from the Australian insurance industry.
"When someone takes out landlord insurance, they rightly expect the insurer to pay out if there's an accident," she says. "Instead, we've seen some insurers send massive bills to tenants, asking them to cover accidental damage, or worse, damage they definitely aren't responsible for.
We've seen some insurers send massive bills to tenants, asking them to cover accidental damage, or worse, damage they definitely aren't responsible forErin Turner, CHOICE director of campaigns and communications
"Some insurers have been sending bills asking for tens or hundreds of thousands of dollars. These amounts are very likely to put people in severe financial hardship or even cause bankruptcy."
Matthew Martin, legal director of WEstjustice's economic justice program, says the community legal centre, based in Melbourne's western suburbs, has seen cases of renters being pursued by big-name insurance firms.
"This behaviour was quite prevalent across the industry, as we saw in our casework alone, Suncorp (GIO and AAMI), QBE and Chubb Insurance either pursuing renters for accidental damage, damage that was not proven to be caused by the renter, or damage was that confirmed not to have been caused by the renter," he tells CHOICE.
CHOICE pick of insurers
The insurer we ranked best when it comes to assessing intentional damage is Commonwealth Bank, which has a clear policy of requiring a police report for any claim (from the landlord) of intentional damage.
CHOICE and WEstjustice team up
Over several months, CHOICE and WEstjustice met with individual insurance companies, the Insurance Council of Australia and regulators ASIC and the ACCC to discuss the issue of landlord insurers recouping costs from renters.
We asked insurance companies to tell us about their practices when it came to pursuing renters – and put the worst performers on notice.
Campaign pays off
Turner says that thanks to this campaign, every major landlord insurance provider in Australia, with the exception of Chubb, has agreed not to pursue renters for accidental or unintentional property damage. For its part, Chubb says it no longer sells landlord insurance.
"Insurers like Suncorp, IAG and QBE have taken the concerns we've raised seriously," says Turner. "They listened and responded to make things fairer. Suncorp, IAG and QBE have now agreed to no longer send bills to uninsured tenants for accidental or unintentional damage.
"Chubb, a brand that was also sending bills out to tenants, let us know that they no longer sell landlord insurance in Australia. This means that people who rent should never get a surprise bill for accidental damage. This is very welcome news and will stop the stress and harm caused by insurers in the past."
Still pursued for intentional damage
Some insurance companies may still try to recover costs from the renter's insurance provider if the renter has contents insurance (they may message the renter to find out). If the renter doesn't have insurance, the companies have promised not to try to recoup the cost of damage from them directly.
According to WEstjustice's Martin, this is better than the previous system.
"This is a significant improvement on previous practices where renters were being pursued for damage they caused accidentally, or where proof of causation was lacking or the damage was confirmed not to have been caused by the renter," he says.
Renters may still be chased if the damage is deemed to be intentional, such as a deliberately smashed window. Insurers differ in how they define and determine intentional damage.
If you've been pursued by an insurance company over accidental damage, please contact CHOICE investigative journalist Jarni Blakkarly at email@example.com.
'Huge win for renters'
Martin says the campaign and pledges from insurance companies not to go after tenants is a "huge win for renters around Australia".
"Ultimately, it means renters should never again be directly receiving letters of demand from landlord insurers for accidental damage claims and only receiving letters from landlord insurers to clarify whether the renter has insurance cover for any accidental damage where negligence can be proven," he says.
Ultimately, it means renters should never again be directly receiving letters of demand from landlord insurers for accidental damage claimsMatthew Martin, legal director of WEstjustice's economic justice program
"This will lay the groundwork to move toward best practice across the industry of treating renters as third party beneficiaries under a landlord insurance policy unless there has been intentional damage."
CHOICE will be watching
Turner says CHOICE will be closely monitoring insurance companies to make sure they fulfil their new promises.
"We have promises from all major insurers that they will do the right thing by people who rent," she says. "But we know that industry practices do change over time. CHOICE will watch this issue closely to make sure that all insurers keep up with the minimum standards they have committed to, as of November 2021."
Stock images: Getty unless otherwise stated.