AFCA Rebukes IAG Over Mismanaged Flood Damage Claim

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Following a flood incident in remote Northern Territory, the driver submitted a claim on March 9 last year after his car was trapped in the floodwaters. He was transporting a friend to retrieve her vehicle when the floodwater immobilized his Holden Commodore, valued at $32,000.

The driver reported significant water intrusion into the vehicle, compromising its engine and electronics. He and his passenger needed over 15 minutes to push the vehicle out from the water.

IAG arranged for the car to be transported to Darwin for inspection. In June, the mechanic’s report indicated no water damage to the engine or interior, yet traces of water were discovered in its oil.

Another mechanic’s assessment found no water in the air filters or throttle but noted rust corrosion, indicative of water presence.

Due to the claim being filed six days after the policy initiation, IAG flagged the claim's legitimacy and handed it over to their fraud investigation unit. The unit interviewed both the driver and passenger and demanded multiple documents, including mobile records, a car purchase contract, and service history.

According to the Australian Financial Complaints Authority (AFCA), the driver submitted all requested documentation with the exception of his bank statements. Unfortunately, his mobile phone records were not provided in the correct format.

The insurer contended that further investigation was contingent on receiving all requested information and upheld their decision to decline the claim pending additional data.

However, AFCA challenged IAG’s stance, arguing the driver had sufficiently complied with the investigation despite the missing documentation. The authority stated that evidence from the two expert reports supported the driver’s account of events.

The authority emphasized the presence of water in the vehicle, citing the seized engine, evident corrosion in all cylinders, the presence of surface rust, and the milky oil in the oil filter, all hinting at water contamination.

Additionally, AFCA criticized IAG for not recognizing the driver’s vulnerability, stemming from his remote residence, financial duress, and health issues, including a broken leg.

AFCA noted that the insurer's mishandling of the claim had caused avoidable stress and delays for the driver. Consequentially, IAG was compelled to pay a penalty of $5400 for non-financial losses.

"The insurer should either properly execute its investigation or make a claim decision based on the available information," AFCA stated. "Unreasonable demands for additional information have resulted in undue stress for the claimant. IAG must compensate him for the resulting inconvenience and emotional distress."

Published:Sunday, 2nd Jun 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Clear

Learning from Near Misses: Enhancing Farm Safety in Australia

18 Feb 2026: Paige Estritori

In July 2025, Farmsafe Australia launched the 'Second Chances - Who Knows How Many You'll Get' campaign, aiming to transform near misses on farms into learning opportunities to prevent future accidents. This initiative underscores the critical importance of recognising and addressing close calls in agricultural settings. - read more

WFI's 2025 Farm Accident Insights: A Call for Enhanced Safety Measures

18 Feb 2026: Paige Estritori

In October 2025, WFI Insurance unveiled its annual farm accident insights as part of Farmsafe Australia's 2025 Safer Farms Report. The findings paint a stark picture of the challenges facing Australian agriculture, with 2024 recording 72 farm-related deaths-the highest in over two decades. - read more

Strengthening Agricultural Insurance: Rural Affinity and Munich Re's Renewed Partnership

10 Feb 2026: Paige Estritori

Rural Affinity has renewed its partnership with Munich Re Specialty - Global Markets under a new five-year agreement, continuing a collaboration that began in 2006. This renewed alliance aims to support Rural Affinity's efforts to expand its agricultural insurance offerings across Australia and introduce new products leveraging technology and innovation. - read more

WFI Insurance and Rural Aid Join Forces to Assist Farmers in Crisis

02 Feb 2026: Paige Estritori

In a significant move to bolster support for Australia's agricultural sector, WFI Insurance has announced a formal partnership with Rural Aid, a leading rural relief charity. This collaboration is set to provide much-needed assistance to farmers and rural communities affected by recent natural disasters, including the devastating bushfires in Victoria and severe weather events in Queensland. - read more

Elders Insurance Warns Farmers of Escalating Summer Storm Threats

02 Feb 2026: Paige Estritori

As the Australian summer approaches, Elders Insurance is calling on farmers to brace for an anticipated increase in storm-related damages. Recent claims data reveals a concerning trend, with summer months accounting for nearly half of all storm-related farm insurance property claims over the past two years. - read more

Significant Reduction in Farm Liability Claims Reflects Enhanced Safety Practices

25 Jan 2026: Paige Estritori

Recent data from WFI Insurance indicates a substantial 75% decrease in farm liability claims over the past year, suggesting that Australian farmers are adopting more effective safety measures. This decline is particularly notable in incidents involving falls from height, which have reached their lowest level in four years. - read more

Click for more Insurance News