AIG Insurance Tangle Over Vacant Property Break-In Unravels

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.

The Australian Financial Complaints Authority (AFCA) intervened, reducing the payout by $56,546. This amount corresponds to the difference the landlord would have owed AIG in premiums to insure a building unoccupied for more than 90 consecutive days - an arrangement the landlord neglected, despite receiving clear directives from a broker.

The landlord, with guidance from their broker, had filed a claim last July after criminals gained access through a leased security gate, prompting AIG to refuse the claim due to the structure’s vacant status, which wasn't covered under the policy.

Prior to the unfortunate event, the broker had made the building owner and managing agent aware of the need to refresh AIG of the vacant situation, potentially affecting claims, and the possibility of acquiring extra coverage by adjusting the premium.

Despite the advice, the owner failed to take action, leading to AIG being notified about the vacancy only post-theft. AFCA indicated that AIG would likely have underwritten the unoccupancy risk had they been told, and determined it fair to authorize the claim - factoring in the supplemental premium and other conditions like an excess charge.

Section 54 of the Insurance Contracts Act became pivotal, with AFCA stating that the breach pertained to not informing the insurer of the decision to leave the property vacant beyond 90 days without seeking written permission - not merely the fact that the premises were left empty.

An AFCA official explained, “I am not of the view that the complainant’s failure to request the insurer’s written consent ... can reasonably be regarded as being capable of causing or contributing to the malicious damage and theft event.”

They emphasized, “The insurer cannot refuse to pay the claim by reason only of the post-contractual act, that is, by reason only of the complainant’s failure to seek its written consent. The insurer is, however, entitled to reduce its liability to the extent that it has been prejudiced.”

AFCA specified that AIG had not proved the extent of its disadvantage equaled its ability to completely dismiss its liability under the policy. Instead, AFCA accepted that the liability compared to the additional premium deemed appropriate if the vacancy had been disclosed.

Arguments suggesting partial occupancy, due to daily visits from a property manager and maintenance by contractors, were rejected, as was the claim that it was unjust to deny coverage because the theft transpired over a weekend when the premises would be unoccupied even if tenanted.

This information originally featured in an article in Insurance News Magazine.

Published:Friday, 1st Nov 2024
Source: Paige Estritori

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

Share this news item:

Insurance News

Clear

AIA Australia Introduces Enhancements to Priority Protection Life Insurance

28 Feb 2026: Paige Estritori

AIA Australia has announced significant updates to its Priority Protection life insurance suite, effective from 9 November 2025. These enhancements are designed to simplify discounts, improve policy clarity, and support premium affordability for policyholders. - read more

Decline in Life and Income Protection Insurance Premiums Benefits Australians

28 Feb 2026: Paige Estritori

Recent data indicates a notable decline in life and income protection insurance premiums across Australia, providing consumers with more affordable coverage options. According to the latest Direct Life Insurance Report from Rainmaker Information, direct life premiums have decreased by 7% since 2024. Similarly, direct income protection premiums have seen significant reductions, with average premiums for waiting periods of 30 days and 90 days decreasing by 12% and 13%, respectively. - read more

AustralianSuper Announces Reduction in Default Income Protection Cover

20 Feb 2026: Paige Estritori

AustralianSuper, one of Australia's largest superannuation funds, has announced a significant change to its default income protection insurance. Effective from 28 February 2026, the fund will reduce the default income protection cover to $1,000 per month. This adjustment aims to align insurance coverage with members' actual income levels and prevent over-insurance, which can erode retirement savings. - read more

APRA Postpones Changes to Individual Disability Income Insurance Policy Terms

20 Feb 2026: Paige Estritori

The Australian Prudential Regulation Authority (APRA) has announced a suspension of the planned changes to individual disability income insurance (IDII) policy contract terms. Originally set to take effect from 1 October 2022, the implementation has been deferred for at least two years, providing insurers and policyholders additional time to adapt to the forthcoming regulations. - read more

AFCA Upholds Policyholder's Income Protection Benefits Against Zurich

12 Feb 2026: Paige Estritori

The Australian Financial Complaints Authority (AFCA) has recently ruled against Zurich Insurance, instructing the insurer to maintain the current income protection benefits for a policyholder after an 11-year delay in proposing a reduction. This decision underscores the critical importance of timely and transparent communication between insurers and their clients. - read more

Neos Recognized as Leading Income Protection Insurer in 2025

12 Feb 2026: Paige Estritori

In the 2025 Life Insurance Awards presented by Money Magazine, Neos has been honored as the top provider in the Income Protection Insurance category. This accolade reflects Neos's commitment to delivering comprehensive and reliable income protection solutions to Australians. - read more

Click for more Insurance News