Insurers halt sales to fire-affected areas

Two of the nation's largest insurers have temporarily halted sales of insurance policies to fire-affected areas in New South Wales and Victoria.

Suncorp and IAG have put a temporary embargo on areas across both states in a move to stop people from panic-buying insurance at the last moment before their homes are destroyed.

Speaking to Financial Standard a Suncorp spokesperson said: "Insurance is intended to provide cover for unforeseen events. When a significant weather event is extremely likely or imminent, and therefore no longer unforeseen, insurers may put an embargo in place to stop accepting any new business, given the elevated risk."

"This is common practice across the industry. There are exceptions for existing customers in certain circumstances, such as when you are buying a home. We are constantly reviewing areas that are embargoed and aim to lift restrictions once the imminent threat has passed."

A spokesperson from IAG reiterated the sentiment, telling Financial Standard: "People are still able to get a new insurance policy when an embargo is in place.  However, they won't be able to make a claim for the specific risk that is included in the embargo until that embargo is lifted."

"The time period for embargoes varies and depends on the likelihood of the risk occurring.  We continually review the embargoes that are in place and will continue to lift them as the risk of a bushfire eases."

Both insurers have suffered profit hits due to an increased number of insurance payouts as a result of the devastating bushfires that have ravaged the country.

Suncorp reported a reinsurance protection program with enhanced natural hazard protection in FY20, with the insurer saying it will not know the full extent to which the deductibles on the dropdown cover will be eroded until the fires are completely over.

Suncorp has received over 2600 bushfire-related claims, with a total cost of between $315 million and $345 million.

IAG has also taken a massive hit from the bushfires, having already blown through its natural disaster budget, receiving 2800 claims with an estimated cost of around $400 million.

Read more: SuncorpIAGFinancial Standard
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