How Insurance Works

Insurance is a general term for products offered to consumers to mitigate risk and provide financial compensation in the event of adverse unforeseen circumstances.

More than 100 brands offer a range of general insurance products to Australian consumers. Every insurer has different products that adhere to different exclusions and policy requirements.

Insurance companies purchase their own form of insurance from other companies, this is called reinsurance. Reinsurance provides risk management for insurers and allows them to meet the terms of their policies. Through an agreement with the insurer, reinsurers are able to negotiate the terms upon which the insurer will be covered.

To receive insurance cover, consumers must purchase a policy from an individual company, so as long as consumers meet the requirements of the insurer and pay their policy fees, they will be eligible for cover. Several policies have minimum requirements for cover, such as good health for travel insurance and building standards for home insurance.

When a policyholder is affected by an event covered by their policy, they must contact their insurer and lodge a claim. The insurer will then determine whether the claim is covered by the policy, if it is legitimate or fraudulent and how much compensation is required. All insurance companies are required to meet the terms of their policies.

If consumers have disputes that were not resolved with their insurance company, they should contact the Financial Ombudsman Service on 1300 78 08 08.

General insurance is one of the most regulated industries in Australia. The government agency that oversees the industry is the Australian Prudential Regulation Authority.

The industry operates under the General Insurance Code of Practice, which is regularly reviewed and updated, the code is also monitored by the Financial Ombudsman Service.