RACQ Insurance Ordered to Increase Payout After Claim Handling Flaws

RACQ Insurance has been instructed to bolster a payout to a customer following a ruling by the Australian Financial Complaints Authority (AFCA).

The dispute arose after the insurer's handling of a house fire claim lodged by a woman in October 2023 was found lacking.

The fire, initiated by scented candles, resulted in significant fire and smoke damage to her home.

The policyholder, who has a disability, reported the fire upon returning from a holiday. Recognising her vulnerability, RACQ assigned her case to their specialised "hypercare" team and provided emergency accommodation. The insurance claim was initially accepted, leading to a $39,074 settlement for damaged contents and the appointment of a builder to conduct necessary repairs.

However, the claimant raised concerns over the quality of the repair work, citing issues such as ceiling damage, poor paint, and protruding nails in the floorboards. An independent consultant recommended further corrective measures, particularly replacement of the kitchen ceiling, nail safety adjustments, and sanding of the floors. When reviewing her concerns, RACQ's assessor acknowledged additional repairs were needed but attributed some of the damages to wear and tear or ground movements rather than the fire incident, offering an additional $7949 for repairs—a sum rejected by the claimant who estimated repair costs exceeding $130,000.

The AFCA concluded that while further fire-related damages were not shown by the claimant, RACQ Insurance had not adequately accounted for the kitchen ceiling replacement in its additional settlement offer. RACQ will now need to secure a quote and cover these costs. The insurer must disburse the $7949 previously proposed, include a 20% increase, and an extra $1500 for items such as toys likely destroyed in the fire.

AFCA also mandated a compensation of $4500 due to the claim handling shortcomings, which included omitting several damaged items from the initial repair scope, resulting in undue delays and emotional distress for the claimant.

Published:Wednesday, 27th Aug 2025
Source: Paige Estritori

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Knowledgebase

Proximate Cause:
The primary cause of loss in an insurance claim, which sets in motion a chain of events leading to the damage or injury.

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