Rawiri lived in a block of flats that suffered flood damage. The insurer accepted the claim for the damage.
In mid-2023, while the claim was in progress, the insurer gave the homeowners notice that the insurer were not going to renew house cover for the flats. Rawiri said the insurer had changed their underwriting for properties, like the flats, on cross lease titles. The homeowners did not want to change to unit title ownership with a body corporate because of the amount of time and money involved in making this change.
The homeowners were not able to find cover with a different insurer because the flood damage claim, which required structural remediations, was still open.
At the homeowners’ request, the insurer periodically agreed to continue cover for a short period of time to assist the homeowners to place the insurance elsewhere. This continued until mid-2024. Rawiri described these discussions as difficult and stressful, with no certainty each time about whether the insurer would agree to extend cover for another 1–2 months.
The homeowners were eventually able to obtain cover with a different insurer when the claim for the flood damage was completed.
Rawiri complained to FSCL on behalf of the homeowners about how the insurer had treated them.
Dispute
Rawiri said it was unethical that the insurer put so much stress on the homeowners. It was not their fault that the insurer’s underwriting changed or that the homeowners could not find cover elsewhere because the flood damage claim was still open. Rawiri said the insurer should have waited until the flood damage claim was closed before they gave notice to end cover.
The insurer explained that their initial position was not to renew cover from August 2023. They agreed to give short term cover to assist the homeowners. This was rolled over until the end of June 2024.
Review
We appreciated that Rawiri and the other homeowners had experienced significant stress because of the insurer’s decision to end cover and during the negotiations with the insurer to extend cover while the homeowners found insurance elsewhere.
However, we concluded that we could not continue investigating the complaint because we were not able to consider the insurer’s decision to end cover or that they would only agree to extend cover for short periods at a time. Under our rules, known as our terms of reference, we cannot consider complaints about an insurer’s commercial judgement in decisions about insurance.
We can consider complaints about maladministration but there was no evidence that the insurer had breached the terms of their insurance contract with the homeowners, or that the insurer had breached the law or the Fair Insurance Code.
We would not have been able to give Rawiri the remedy he was seeking that the insurance industry change their practices and commit to not treating other homeowners in the same way. While insurers should treat their customers fairly, we cannot require an insurer to continue to offer cover or offer cover until a claim is closed. We cannot interfere with an insurer’s decision about how much risk they are prepared to take on.
Resolution
Rawiri agreed to discontinue the complaint when we explained our terms of reference to him.
Insights for consumers
FSCL cannot consider complaints about an insurer’s commercial judgement. This includes complaints about whether an insurer will offer cover or continue to offer cover, the terms on which they will offer cover, and the premiums they will charge to provide cover.
