Landlord Insurers Won’t Rule Out Chasing Tenants For Unpaid Rent Once The Pandemic Ends

The Insurance Council of Australia has today refused to rule out whether insurers will chase tenants for unpaid rent once the coronavirus pandemic is over, potentially leaving people who are already in financial distress with a bill for thousands of dollars once this is all over.

It comes as some landlords report their insurance companies are refusing to pay out policies for rental income they lost after agreeing to reduce rent during the coronavirus crisis.

The ICA was grilled about landlord insurance and other aspects this morning during a government committee meeting, which is undertaking a review into the four major banks and other financial institutions.

There are around one million landlord policies in place across Australia, and according to the council about 3,000 claims regarding a loss of rental income are currently being assessed.

Tenants who have been financially impacted by coronavirus have been protected with a temporary moratorium on evictions, but have been asked to negotiate with landlords if they need a rent reduction.

The ICA website advises landlords that tenants are expected to continue paying rent where they have funds available, “especially when they are receiving taxpayer-funded support”.

It also says that cover for loss of rent is not always included in a landlord policy.

Bad enough that l/lord insurance doesn’t cover loss of rent from pandemic, but to harass victims of the disaster is beyond awful. Insurance is really effing expensive too – they could def afford to pay. NB tenant has a rent holiday and assured will have a home no matter what.

— Mimi Dumpling (@DumplingMimi) April 28, 2020

The ambiguity from both the government and now insurers have left many vulnerable people with questions about what to expect if landlords and tenants can’t reach an agreement.

Insurers Should “Treat Each Case On In Its Merits”

ICA CEO Robert Whelan said they had spoken to members about community expectations, but would not enforce any consequences on insurers for not complying with “what are essentially principles as opposed to legal constraints”.

“They are contracts at the end of the day that have been entered into, and the insurers are abiding by those contracts and so too the tenants should be as well,” he said.

This didn’t satisfy Labor MP and deputy chair Dr Andrew Leigh, who quizzed him on whether insurers would chase tenants for unpaid rent after the crisis passes.

“It hardly seems in the spirit of things,” he said. “There’s a range of rent moratoriums that are being put in place as a result of COVID-19. Landlords are suffering some of that pain, and are then turning to their insurer, and you’re telling me you think it would be alright if the insurer then went back and sued the tenant?”

A rent freeze and eviction moratorium means jack shit if 4 months from now no one has the thousands of dollars they owe in backpay rent and get evicted anyway. This is a ticking fucking time bomb.

— There can only be 20 unproblematic heteros at once (@NathanWilburn1) April 1, 2020

Insurance Council says they will retrieve rents after COVID-19, because nothing says “we’re all in this together” more than hunting down tenants for unpaid rents after they’ve lost their jobs. #auspol

— Eddy Jokovich (@EddyJokovich) April 28, 2020

Whelan denied that, but said it was a decision for individual insurance companies to make based on what those companies can absorb.

“I think the typical situation with insurers in that situation is that they treat each case on its merits and encourage individuals to come to them to talk through the circumstances in which they find themselves,” he said.

“Admittedly, it could happen. But at the end of the day, those individual decisions need to be taken into account for individual circumstances at the time.”

Leigh said he was surprised the ICA were taking a “hands off” approach rather than making a blanket rule — something the federal government has also been criticised for on the rental issue.

But Whelan said they are part of discussion and monitoring things.

“We want to make sure that the industry’s reputation is held high,” he said.