Claimants warned to check quake coverage

INSURERS are bracing for a wave of claims from the earthquake that has shaken major metro areas across Victoria, NSW, the ACT and Tasmania.

The magnitude 5.6 earthquake that shook Australia’s east coast on Wednesday morning caused several buildings to be seriously damaged.

But Australians have been urged to check their policy wordings to ensure they can claim for damage resulting from the earthquake.

Most policies cover earthquakes but many have different wording for the time frame in which a claim can be made.

Canstar data show this claims window can vary from two to seven days.

Canstar group executive financial services Steve Mickenbecker said the time frame was aimed at ensuring insurers were not stung by a long tail of claims after the event.

“Let’s say two weeks later you discover there is damage, how can you prove it’s from the earthquake?” he said.

Mr Mickenbecker said many policies that cover earthquakes charge an earthquake excess payment in the event of a claim as earthquake damage could be costly.

“There are certain events that, when they occur, cause massive and widespread damage,” he said. “They’re not super frequent but when they happen they’re big events.”

It’s often cheaper to insure a wood frame house than it is to cover a brick property for earthquake damage.

Customers are urged to contact insurers as soon as possible to lodge a claim and to avoid unauthorised work to repair a property, which may not be covered by insurance.

The 5.8 magnitude earthquake that hit Newcastle in 1989 killed 13 people and injured 160 with insurers ultimately slugged for $3.2bn in losses from that quake.

Major insurers cover themselves with reinsurers to protect against losses arising from natural disasters.

A report released in August from risk consultancy Aon found natural disasters cost Australian insurers $1bn a year on average.

QBE, one of Australia’s largest insurers, locked in a $3.4bn ceiling to cover global catastrophe claims.

QBE set aside $175m for non-peak disaster claims in Australia and New Zealand, up from $125m in 2020.

Insurers have been hit by market falls in the wake of the quake: QBE fell 3.8 per cent, Suncorp dipped 1.9 per cent and IAG dived 3.2 per cent in early trading.

A recent report by Munich RE, a reinsurance agency for Australia’s insurers, found Australia was vulnerable to extreme and concentrated losses from an earthquake.

“The vulnerable, highly concentrated building stock has the potential for extreme losses,” the report said.