Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

I speak in support of Insurance Contracts Amendment Bill 2013. Whilst the member for Casey has accurately gone through the schedules, he says that this particular piece of legislation arises out of the review back in 2004 by the panel consisting of Mr Alan Cameron AM and Ms Nancy Milne. It is a bit broader than that. In fact, or response in relation to insurance contracts also arises out of the natural disaster insurance review report which was commissioned to examine insurance for flood and other natural disasters following the 2010 and 2011 summer floods and also was in part a response to the House of Representatives Standing Committee on Social Policy and Legal Affairs report In the Wake of Disasters—volume 1: The Operation of the Insurance Industry during Disaster Events, which was presented in parliament in February 2012. So it is broader than that.

I will not go through it schedule by schedule but I will deal with the issue of insurance and how it affects natural disaster. We live in a country of fires, floods and cyclones and other extreme weather events. Those recent natural disasters have been catastrophic not just nationally, not just interstate but in my electorate of Blair, which contains most of Ipswich and all the Somerset region, containing places like the Wivenhoe Dam, the Somerset Dam, Lockyer Creek, Bremer River and the Brisbane River. We have seen catastrophe and people having to interact with the insurance industry, from farmers to businessmen to householders from Mount Stanley and Mount Kilcoy to Karalee and Ebbw Vale and other places in and around Ipswich as well, from stormwater in Redbank Plains to floods in Churchill to terrible disasters from flooding in places like Basin Pocket, North Booval, East Ipswich and Bundamba.

It is not just my electorate that has been affected but in 2009 Victoria experienced the tragic Black Saturday bushfires and 2009 and 2011 fires affected Western Australia. The people of North Queensland, Madam Acting Deputy Speaker Littlemore, in our home state have suffered terribly with cyclones Larry, Yasi and Oswald, and we have seen flooding in Western Australia, New South Wales and regional Victoria. And of course there have been 17 major floods since 1840 in the Ipswich and Brisbane region of South-East Queensland. I am sure that many people would not have known places like Grantham, the Lockyer Valley and Ferndale in the Somerset region but have heard of them now.

In 2011 we saw about 186,000 insurance claims as a result of the floods and cyclone in Queensland, the floods in Victoria and the storms and fires in Western Australia. That is an enormous number of insurance claims. Australia has a very large and profitable insurance industry. The gross premiums are about $35 billion per annum and they have total assets of nearly $114 billion. The industry employs about 60,000 people. It pays out on average about $95 million per working day in claims. The big players are companies like Suncorp, IAG, QBE insurance and Allianz Australia. It is a pretty volatile market, of course, but there are high levels of competition.

The experience of my community during the floods was that they were brutalised by the floods and brutalised by the claims process they endured dealing with their insurance. Contracts of insurance are really a transfer of economic risk from an insured to an insurer. People do not quite understand that. A premium is paid in relation to it. We have very much adopted the English law in relation to insurance. The main legislation came into Australia in 1986 with the Insurance Contracts Act, which we amended when we came to office. Under that Insurance Contracts Act, people must act with utmost good faith towards one another. Sadly, the insurance industry has had a real get-out-of-jail-free card in relation to those types of breaches. There are of course precontractual negotiations. Some of them can just be a phone call. Others can be correspondence through email. It is a very serious thing to mislead people, particularly in relation to material facts. As a litigation lawyer, I dealt with those kinds of things in private practice.

There are many changes in this bill. One in the first schedule is an amendment to the Insurance Contracts Act so that failure to comply with the duty of utmost good faith is a breach of the Insurance Contracts Act. That is something that the House of Representatives standing committee recommended that we do. We found during our inquiry that insurance companies not only were unaccountable in that regard but had their own insurance code of practice which they felt they could use to get out of jail free when a natural disaster took place. In other words, they had obligations which their clients felt they had contracted with the insurance company in terms of notification, processing of claims and getting back information. But then the insurance companies simply junked the code of practice via a provision that they had in 4.3 of that code of practice.

I admit that, subsequent to that, with pressure from a lot of people from both sides of the House, particularly Minister Shorten, the member for Maribyrnong, they did see the need for an amendment in that regard. I commend the Insurance Council of Australia for their review. They have engaged Ian Enright, an independent reviewer, to look at their code of practice. I met with him recently and discussed the issues that have affected my community. I raised the issue that is before us tonight, about the breach of utmost good faith, and the fact that we need this type of legislation as the insurance industry, by virtue of legislative omission, found itself in a very privileged position.

That standing committee of the House of Representatives recommended a number of changes in relation to the Insurance Contracts Act, and I am pleased that the government took them up. Those included a single definition of 'flood' for home building, home contents, small business, strata title and corporate insurance, and the provision of a key facts sheet, something that was intelligible, in simple and clear English, and did not require a doctorate of law to understand.

I have said before that during the 2011 flood—we were not flooded in Ipswich at my house, although it happened when I was a child—my wife actually asked me, 'Do we have flood insurance?' I looked at my own personal insurance contract and it mentioned 'flood' a number of times. Having had 20 years as a litigation lawyer with a law degree, I can read a contract pretty well. It took me a number of goes to read that I actually personally was not covered for flood insurance. When you are in a time of vulnerability, when your home, farm or business has been flooded, and you are having to deal with an insurance company and you do not understand all these things, the power imbalance is enormous. What we are trying to do with the legislation before us is to get a fairer insurance regime in this country to equalise the power imbalance. That is what we are trying to do. And we are trying to get ASIC involved. I am pleased that we are legislating to protect consumers from unfair terms in insurance contracts. I think those protections should have been for a long time enshrined in our laws to cover these types of situations. Consumer protection legislation is vital. I am pleased it is being extended to general insurance contracts, which in the past have been excluded.

Australians should not really have to fight and fight and fight in this regard. I have seen on numerous occasions the Financial Ombudsman actually give decisions negative to constituents in Blair but then criticise the insurance company for the claims process handling that they undertook in relation to those particular people. I can think of a flower farmer and his wife who have just recently been involved in one of those cases. I can think of another case where a businessman and his wife in Ipswich were in a similar situation—denied a claim but then the insurance company was criticised by the Financial Ombudsman for the way in which the process was conducted by the insurance company. That is simply unacceptable. People should not be brutalised by a flood and then brutalised by the claims process handling by the insurance company—someone they have contracted with and engaged with in good faith. People need to know that when they pay their premiums they are going to get a fair go, and the insurance company should not hide behind unfair terms to leave people high and dry when it comes to claims.

There are many reforms in this particular piece of legislation. But I think that it needs to be seen in the context of what we are doing to fix flood insurance in this country. I was pleased recently to see the Prime Minister visit my electorate, and to see steps taken to reduce the cost of insurance across Queensland and elsewhere. It is particularly important because the insurance industry, as I outlined earlier, is a large employer, a large business and a large group of companies that deal with Australians every day. Most Australians do not get charged with criminal offences. Most Australians do not have car accidents. Most Australians do not get injured at work. But most Australians at some point in their life will have an insurance contract. In relation to the reform, the whole package needs to be seen: the single definition of flood, the product disclosure statement and the key facts statement. The amendments before this particular chamber tonight and the work we are doing in terms of flood mitigation and insurance affordability are absolutely critical. We have proposed establishing a national insurance affordability council, and we are working with the insurance industry. I am pleased to see press releases from the Insurance Council of Australia, which is not always favourable to us, welcoming the announcement that this government has undertaken $100 million in funding over two years for flood mitigation projects. The purpose of that is to deal with the insurance industry and reduce the cost of insurance. Reducing the cost of insurance, reducing the burden of the claims process handling is so critical.

In my electorate of Blair, I am pleased to announce $10 million to the Ipswich City Council for flood mitigation projects. That was a terrible experience for people from Rosewood to Redbank Plains, experiencing flood again and again. We saw floods in Ipswich not just in 1893 and in 1974 but in 2011 and in 2013. The floods have really terrorised the people. I was pleased to see that the flood work will be undertaken in places like Thagoona, $1.8 million; Rosewood, $2.8 million; and Redbank Plains, $3.9 million. Nine of the top 10 projects of the Ipswich City Council to reduce the impact of floods on the people of Ipswich will be proceeded with. This is what the Insurance Council of Australia have been calling for. This is what I have been calling for—in the Queensland Times, on River 94.9 radio—again and again, because, by legislation and by action, we can actually make an impact. The Insurance Council have talked about levies in country towns in Queensland and the prospect of levies reducing insurance premiums. Insurance premiums have gone up massively in my community. One of those projects I mentioned involves a levy. I have been to Thagoona many times. This is particularly important for my electorate. I think this is the sort of reform that we need to undertake.

I am pleased to speak on this bill. I am pleased about these legislative changes. I am pleased about the recent announcement. I am also pleased that the Queensland government is going to match the funding that we have put aside for an $80 million mitigation fund to better the situation in Queensland and elsewhere. I support this legislation that is before the chamber.

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