Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Assistant Treasurer and the Minister for Financial Services and Superannuation. What action has the government taken to address concerns and confusion about private flood insurance cover in communities across Australia?

Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I thank the member for Oxley for his question about the insurance claims of flood affected victims. I know that the member for Oxley and many members on both sides of the House have been pursuing the interests of their electorates who had insurance claims following the floods.

What happens with insurance after a flood is that many Australians who do not always like paying insurance but have paid it year in, year out expect their insurance companies to stand beside them when disaster strikes—and quite rightly so. What has been happening in the recent floods—and many members on both sides have been at pains to alert the government to this—is that in many cases insurance companies have stepped up to the massive deluge of claims. In the case of the Queensland floods alone, there have been 40,000 claims. In the case of Cyclone Yasi, there have been 5,000 claims so far. In the case of the fires in Western Australia, there have been 500 and in the case of the flooding in Victoria there have been nearly 5,000 claims. Despite handling the bulk of the claims, it has become clear to the government that there are some longstanding issues which have not been addressed in a policy sense which compromise and affect the ability of insured people to recover and get on with their lives.

I go to the issue of the definition of flood—the plain English meaning in contracts—and the use of fine print to defeat people’s otherwise legitimate claims. This government has, since 5 January, immediately after the Rockhampton flood, met with the insurance industry. It has, in working with the state governments and legal groups, made legal services available for the insured to be able to claim. It has put in place the capacity for the insurance industry to have a panel of hydrologists to make sure that technical experts can get on and make the claims as quickly as possible and assess their validity. But what we are seeing—and I know members on both sides of the House have raised this issue—is that in some cases some companies are relying upon the fine print to avoid honouring their obligations.

We have seen some insurance companies provide river flood coverage and get on with life, including Suncorp, and we have seen RACQ and Comminsure step forward to provide payments to policyholders without deciding the issue of flood insurance. We also need to see other companies stepping forward and resolving once and for all a proper plain English definition of flood coverage. It is not too hard, in the government’s opinion, for the insurance industry to work with consumer groups and the regulators to come up with clear definitions of what is a flood.

There are different definitions. In the Wagga floods of 2009 in New South Wales, it turned out that insurance companies were using 11 different definitions of floods. This is a very difficult area for consumers to seek justice. I am aware of claims where claimants have adjusted their house and the insurance companies have then tried to say that the whole policy is void. I am aware of different companies taking different attitudes to the cause of flood damage in some of the flood affected regions. I acknowledge the work of not only the member for Oxley and the member for Blair but indeed the member for Wright and the member for Groom in chasing down insurance companies who were being recalcitrant in the definition of flood damage and seeking consistency amongst the companies.

Where we go from here is that in the next few weeks the insurance industry has committed to developing one definition of floods across all insurance products. This is a step forward which has not happened in the past. In addition, the insurance industry has agreed that—perhaps not breaking any barriers of rocket science but to the satisfaction of consumers—there should be a plain English explanation on one page of what homeowners are insured for.

There are many more issues in resolving adequate insurance coverage in the future for the next natural disaster, and we will work on those issues, too, but I can report to the House that the insurance industry, at the prompting of the government, accepts that it has to lift its performance. At the same time, I can report that the insurance industry is handling the vast bulk of these claims in a timely fashion. This government will keep its work going. (Time expired)