Financial Counselling Victoria has urged the industry ombudsman to redefine “fair and accurate” relating to the scope of works in home insurance cash settlement cases.

“Financial counsellors have ample evidence of extensive negotiations between insurers and claimants on SOWs, and report that for many consumers, there is a gap in understanding an SOW,” it says.

The peak body argues the Australian Financial Complaints Authority’s proposed approach to general insurance claims disputes should be “explicit in detailing factors that may influence [its] decision-making about the fairness and accuracy of an SOW”.

Such factors should include evidence the complainant has the capacity to understand and review a scope of works; and proof the scope of works has been fully reviewed and approved by the complainant.

“Where there is any doubt about the fairness of the SOW, there should be a requirement for the insurer to fund a second SOW or independent assessment of the first SOW, to be provided by a qualified professional selected by AFCA or the complainant,” the peak body says in a submission on AFCA’s proposed approach.

The proposed approach says a scope of works is generally the most important factor in determining if a cash settlement offer is fair.

“AFCA must be satisfied the scope of works fairly reflects the repairs necessary for the claim-related damage,” it says. “This includes whether it is consistent with the policy (e.g. to restore the property back to its condition when new, or identifies all claim related damage).

“To the extent the scope of works does not, then it is unlikely any quotation based on such a scope of works would be considered fair.”