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One of the nation’s largest insurance companies has been taken to court by the Australian Securities and Investment Commission (ASIC) over allegations of serious claims handling failures, with the watchdog pursuing a case that took nearly three years to resolve.
Hollard Insurance, which is owned by South Africa-based Hollard Group, has more than 1.2 million customers and accounts for 4.4 per cent of the general insurance market in Australia.
ASIC initiated the case in Federal Court, alleging Hollard breached its duty of utmost good faith in handling a home building and contents insurance claim made by a couple in regional Victoria.
The claim was made in October 2021 after a major storm damaged the roof of the couple’s home, with the initial inspection report concluding that damage to the roof and fencing on the property was caused by the storm, with the “roof tiles, ridge cap tiles, hotwater system and supporting rafters” being “damaged beyond repair” and requiring replacement.
While Hollard initially accepted the claim, the insurer delayed decisions about repairs and took more than nine months to launch an inspection by a structural engineer and delayed providing temporary accommodation to the couple.
In late April 2023, Hollard rejected the claim following reports by a file manager at Construct Services over prior engineer reports lodged to the insurer. The couple rejected a cash offer proposed by Hollard and lodged a complaint with the Australian Financial Complaints Authority (AFCA).
Following the complaint process with AFCA, Hollard was found responsible for covering repair costs due to storm damage, with the insurer being forced to engage an engineer, roofing specialist, expert builder and mould restoration expert to draw up a statement of the necessary works.
The insurer was also to cover the costs of temporary accommodation until repairs were completed and pay $10,8000 in non-financial loss compensation.
Following this, the North Sydney-based insurer agreed to treat the home as a total loss — rather than repairing just the storm-damaged areas - and to fund temporary accommodation until 1 December 2025.
A total cash settlement of $1.5 million was also offered by Hollard, which is yet to be paid in full.
In a concise statement lodged to the court, the plaintiff claims that the delays caused “unnecessary damage to their home” and that it became “riddled with moisture, mould and decay” and “was declared uninhabitable”.
“In the end, because of the excessive delays by Hollard and the failure to undertake make-safe works, the home has become so riddled with moisture, mould and decay that it is uninhabitable and now needs to be demolished and rebuilt,” ASIC Deputy Chair Sarah Court said.
“The egregious delay highlights ASIC’s concern about the significant rise in general insurance complaints reported to AFCA since the 2022 floods, particularly those involving claim delays. We are taking this case to send a clear message that delays of this magnitude are not acceptable and, in our view, are unlawful.
“The consequences of Hollard’s actions have caused significant harm to the policyholders who remain without their own home three and a half years later.”
In mid-2021, it was announced that the Hollard Group would acquire the general insurance business CommInsure from the Commonwealth Bank (ASX: CBA) for $625 million. At the time, the deal transferred more than 800,000 policies to Hollard.
By late 2022, CommInsure joined Hollard and was been renamed Hollard Insurance Partners Limited (HIP).
Today, the Australian arm of the South Africa-based group has more than 1.2 million customers and 1,600 employees, compared to just three staff when it launched locally 26 years ago. The group has an estimated annual revenue of around $2.3 billion for FY24.
Business News Australia has contacted Hollard Insurance for comment.
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