Community lawyers want law reform and more funding as delays, errors and incompetence from insurers add to trauma for survivors of floods, storms and bushfires.
Poor claims handling including delays, bullying, inadequate communication, errors and sheer incompetence are experienced by one in five clients.
A report from the Financial Rights Legal Centre found COVID-19 compounded difficulties for insurers and people wanting to rebuild.
Lockdowns, state border closures and broken supply chains added further complications and delays.
The experiences of more than 700 clients during an extreme 18-month period were captured in the report, from the bushfire season of 2019/20 to a deadly cyclone that struck Western Australia this year.
In one case, a farm and homestead was damaged in a hail storm two years ago.
The owner claimed on her farm policy and it took a year for her insurer to start repairs.
The repairs were due to take two weeks, but the woman is still living in temporary accommodation and there have been problems with the quality of work.
The legal centre's chief executive Karen Cox has urged the corporate watchdog to step up and use its powers of supervision and enforcement.
"Insurers should be better assisting people to identify the appropriate sum insured, and basing cash settlement offers on the likely cost to the customer rather than the insurer," Ms Cox said.
Insurers should also identify customers who are frail, disabled or suffering mental health issues, and make them a priority.
Ms Cox wants the government to consider direct subsidies for insurance premiums in areas prone to disasters and fund risk mitigation work on roads, bridges and sea fronts.
There are certain regions in Australia where home insurance prices are soaring due to exposure to extreme weather risk and homes will one day become uninsurable.
The biggest issue in the wake of the catastrophic bushfires of 2019/20 is underinsurance, as premiums have become too expensive for many.
Another client was uninsured and lost almost everything in a bushfire. Now his debts are overwhelming and he could lose his home.
When cash settlements were made, the report found people struggled to get enough to rebuild.
Some insurers have refused to take responsibility for damage caused by their own third party assessors or builders, or damage caused by the insurer's delay.
In many cases, the insurer's assessors said a defect or pre-existing damage, a lack of maintenance or wear and tear had contributed to the damage.
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