By Adrian Papaianni, Partner and Victor Hoang, Senior Associate 

In recent years, major Australian insurers have seen increased home insurance claims caused or contributed to by a lack of home maintenance and storm damage as cost of living pressures increase. In response, they’ve introduced new community education programs and are using Artificial Intelligence (AI) to help reduce claim rejections and avoid large payouts that can raise costs for everyone.

Homeowner responsibility and application of section 54 of the Insurance Contracts Act 1984

The onus is on an insurer to establish an entitlement to rely on an exclusion.

Where a Policy’s Insuring Clause otherwise responds (and unless an exclusion otherwise applies), then pursuant to section 54 of the Insurance Contracts Act 1984 (Cth) (the Act), Insurers cannot deny a home insurance claim unless there is contribution to the damage or an act or omission has caused the Insurer prejudice. If, for example, an owner didn’t clean their gutters or replace a worn-out plumbing hose, and that led to water or storm damage, the claim might be denied on the basis of lack of wear, tear and gradual deterioration—unless an owner can show that the issue could not have been reasonably avoided by, say, regular maintenance of the home.

Most insurance polices exclude damage caused by normal wear , tear and deterioration and/or lack of or maintenance. For example, flexible water hoses (called “flexi-hoses“)—used under sinks and that are connected to water supplies—often burst due to rust, corrosion, or poor installation. One major Australian insurer found that it was denying a significant amount of flexi-hose claims where water leaks had been caused by wear and tear or lack of maintenance. Similarly, home insurance claims related to storm damage were found to be regularly denied due to instances of rain gutters and overflows being blocked, non-compliant, or not regularly cleaned thereby causing unnecessary rain flooding onto and into homes.

In July 2023, the General Insurance Code Governance Committee (CGC) reported that over half of all home insurance claims were being denied due to maintenance or wear-and-tear exclusions.[1] A month later, the Australian Securities and Investments Commission (ASIC) criticized insurers for relying too heavily on these clauses, especially when the exclusions were vague or unclear.[2] ASIC also said Insurers needed to do a better job of communicating with customers and supporting vulnerable people.

Fortunately, since 2023, major Australian Insurers, such as Allianz and Suncorp, have started developing consistent approaches and innovations to deal with the concerns raised by the CGC and ASIC, which are now evidencing progress and customer satisfaction in the property damage and storm-related damage claims space.

Initiatives by insurers to deal with fair wear and tear and maintenance exclusions

Insurers are now trying to educate homeowners to help prevent claims from being denied due to exclusions related to wear and tear poor maintenance:

• Scott Cam, a well-known TV presenter, hosts a video series on Allianz’s website showing how to check and maintain things in a home, like flexi-hoses and gutters.
• Suncorp (and its brands) are investing in disaster response teams and have launched “Disaster Response Hubs” in flood-prone areas like Port Macquarie and Taree to assist and educate homeowners in properly maintaining their homes so as to mitigate or prevent storm-related damage.
• Text messages are sent to homeowners before storms to help them prepare by providing them with adequate warning and providing tips to deal with, say, hail storms or expected flooding by taking preventative measures, such as moving contents to upstairs areas, and closing and securing windows and doors.
• A new type of digital home risk software developed by Suncorp, called ‘Haven’,  shows homeowners what weather risks (like floods or bushfires) their property faces, and gives them tailored recommendations – based on their home’s age, design, and local weather history—on how to maintain their property to mitigate damage caused by weather risks, such as clearing excess leafage and greenery for bushfire prone areas, or considering re-flooring works and electrical circuit splits in flood affected homes. [3]
• Furthermore, one case study by a major Australia Insurer showed that Brisbane homeowners who used the digital risk software had much less damage from a cyclone in 2025 in comparison to the flooding in 2022 because they followed simple tips from the software, like raising electrical equipment and power boards, splitting power circuits between upstairs and downstairs, and switching to waterproof flooring that was easy to clean after flooding.[4]

Artificial Intelligence to deal with claims management

As at 12 June 2025, Suncorp has introduced an AI claims summary tool called ‘Single View of Claim; across its operations to quickly reveal a claim’s status and next steps for home and contents insurance claims by using generative AI.[5]

The claims managers can use the AI software to access a simplified summary of a claim, reducing the time spent looking for information and increasing the accuracy and quality of their customer interactions as they provide updates on the claim’s progress. The AI software so far has produced over 1.8 million claims summaries by processing 2.74 billion words in the fraction of the time required for a human team member to read.

The AI software also goes so far as to predict extreme weather patterns with customer information to alert customers and suppliers. In conjunction with this software, Suncorp is also educating staff through leadership courses, virtual conferences, “hackathons” and intensive reskilling programs.

Take-Away Message

Major Australian Insurers are taking real steps to address the improvement areas raised by regulators. By using education, technology, and better claims practices, they are reducing the number of denied claims to better assist those affected by property damage or storm-related damage.

This also has important legal effects as follows:

• Fewer complaints to the Australian Financial Complaints Authority (AFCA) due to over-reliance on policy exclusions.
• Fewer or simpler litigated indemnity disputes over policy coverage, prejudice suffered by insurers, and the lack of maintenance being fought with excessive expert liability and quantum evidence
• A stronger legal position for insurers who can show they helped customers maintain their homes and have acted in good faith.

The use of technology is an innovative trend to ultimately help improve outcomes for homeowners who suffer property damage and also to help educate them to proactively maintain their properties to reduce excluded claims.

 

[1] General Insurance Code Governance Committee Annual Report 2023-24.

[2] Navigating the storm: ASIC’s review of home insurance claims – Report 768 – August 2023.

[3] https://www.suncorpgroup.com.au/news/features/shelter-from-the-storm

[4] https://www.suncorpgroup.com.au/news/features/shelter-from-the-storm

[5] https://www.insurancenews.com.au/daily/shifting-gear-ai-rollout-speeds-suncorp-claim-reviews