A huge number of Australians with side hustles or hobby businesses are unknowingly exposed to underinsurance (and the risk of cancellation) in their home and contents insurance policies.
A recent ABC investigation found hobby business owners can suffer immediate cancellations to their home and contents insurance after informing their insurer of their commercial activities.
Griffyn Branagh, for example, asked his insurer AAMI to check if his mobile bicycle repair business affected his contents insurance for his rented home in Torquay. Before the COVID-19 pandemic, he went to people's homes to repair bikes. However, during the pandemic, he started picking up bikes and taking them to his garage.
Considering the risk, the insurer told him it would cancel the content insurance. An AAMI spokesperson explained that the company's home insurance policies were priced for the risk of a domestic private home. Therefore, the risk becomes significant if a policyholder runs a business at home.
“We communicate customers' answers to our policy screening questions – which include questions relating to the operation of a business from home – and ask them to confirm their accuracy,” the spokesperson said, as reported by ABC.
Consumer Action Law Centre chief executive Gerard Brody said insurers have the right to decide the risk level they want to cover and how to price it. However, thousands of Aussies might take a significant hit from this decision.
“If you are entered into an insurance policy, and there was some sort of misrepresentation, or it was a policy that was never going to cover you, arguably, there is a claim to get your premiums back because the policy was effectively junk,” he said, as reported by ABC.
Brody called on insurers to “look at the fairness of what they're doing and come up with a better solution for their customers.”
A spokesperson for the Insurance Council of Australia (ICA) explained that many insurers offer various home and contents insurance products and use different underwriting criteria, so cover and cost might differ.
Meanwhile, Maurice Blackburn principal lawyer Hayriye Uluca said the issue is related to unfair contract term protections if an everyday consumer was “in a weakened bargaining position.”
