Dick Adams (Lyons, Australian Labor Party) Share this | Hansard source

In 2010-11, there were a significant number of natural disasters in Australia: Queensland, New South Wales, Victoria and Tasmania all experienced severe flooding. For two years in a row now we have had extremely wet conditions and a lot more flooding in Queensland, Victoria and New South Wales. The number of people adversely affected by these natural disasters as a result of inadequate insurance cover has highlighted the level of consumer confusion about what is covered in insurance policies, in particular the extent to which policies provide cover for flood and what cover for flood means.

On 5 April 2011, the government released a consultation paper entitled 'Reforming Flood Insurance: Clearing the Waters' in order to engage the community in suggesting improvements to the regulatory framework and other aspects of Australia's insurance market. The paper contained two key proposals designed to improve clarity for consumers in relation to insurance policies and, in particular, the cover provided for various types of flood—namely, a standard definition of flood as well as a key facts sheet, the KFS, to outline the key information in relation to home building and home contents policies.

The Insurance Contracts Amendment Bill 2011 implements those proposals. The main points in this bill cover the standard definition of flood, which, hopefully, will reduce consumers' confusion regarding what is and what is not included in insurance policies and will avoid situations where neighbouring properties affected by the same inundation event receive different claim assessments because the policies covering them, where they exist, use different definitions of flood.

Compliance costs will be incurred by the industry for reassessing and rewriting policies. Industry has also indicated that a standard definition could result in repricing policies or in products being withdrawn, as those policies might provide greater coverage for flood, but at least this will be known to the consumer and they can take action to mitigate the risk. Either way, it will help both the insurance provider and the consumer to be more informed. Of course, this brings in the situation of where we build, planning laws and issues in relation to insurance. The key facts sheet, by outlining key information in a concise form, will provide increased simplicity, consistency and comparability for consumers where they are making decisions regarding the purchase of the HBHC insurance policies. The key facts sheet will also facilitate more effective decision-making through an increased level of familiarity: knowing what to look for and the meaning of certain words and concepts. While the actual wording for 'flood' included in regulations will be subject to consultation, it is expected to be consistent with the wording proposed by the government's consultation paper Reforming flood insurance:Clearing the waters. The proposed wording is that 'flood' means the covering of normally dry land by water that has escaped or been released from normal confines of any lake or any river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal or dam. There is still work being done on these words, but I believe this will be the background definition that will be part of the regulations currently being revised.

Insurance providers are required to use a standard definition of the term 'flood' when using the word 'flood' or other parts of speech or grammatical forms of that word, such as flooding, in the prescribed contract, or the notice or other document or information, as provided in those regulations. If the definition or meaning of the word 'flood' or other parts of speech or grammatical form of that word, such as flooding, is different from the definition of the meaning of the word 'flood' provided in the regulations, the prescribed contract will be taken to have the meaning of 'flood' as provided in the regulations.

During the times of the floods in Tasmania in my electorate of Lyons—mainly in early 2011—we had great confusion among the insurance companies, who could not decide what was a flood and what was not. It made it very hard for people to claim anything and even harder for them to mitigate risk into the future. People just did not know what the circumstances were.

Tasmania did it hard during the debate about public liability insurance as well, as there was a great deal of misinformation floating around at the time. The insurance industry failed on both of those occasions to be on the front foot, looking at what the consumer needs were and meeting their needs. It took a while before something could be done to allow small groups to stage events and be able to afford public liability, but it was a tangled web to get through and it took many community organisations in my electorate a long time to work their way through this—and some were lost in the process.

It is the same with floods and other natural disasters. If people can assess their risk and are able to realise what could happen given a series of circumstances then they can do something, but when they run blind on how insurance companies operate or what meaning certain words have then everybody loses, most of all small clients who can least afford it.

The report of the House of Representatives Standing Committee on Social Policy and Legal Affairs entitled In the wake of disasters was timely and covered a lot of the heartbreak that occurred during the 2011 floods, and hopefully will help those people still struggling in the floods this year. Those recent problems and floods have taken a large toll on people and entire communities—there is enormous trauma that comes from significant or total destruction of one's home, its contents, the businesses that people run and the loss of stock or the loss of pets through flooding. On top of this, affected residents have to deal with the disruptions to work, school, social networks, accommodation, health and transport. Trying to sort out insurance on top of all of this and trying to work through the processes you are required to when collecting insurance when there is a lack of information is soul destroying for individuals. I saw that during the floods in January 2011 in Tasmania. We need to go on funding services to assist communities with the practical aspects of rebuilding lives and we need to fund financial and emotional counselling. We must also ensure that insurance cover is seen as a part of the process. It should be possible to start sorting out one's life if there are guidelines that are easy to follow and an understanding of what insurance can cover and what the community can do to help those exposed to uninsurable events. This is not something new, but extreme events are becoming more common in this current climate cycle and people need to be aware of those problems.

I remember some of the problems that occurred in my electorate in the township of Railton in the municipality of Kentish. The river behind one particular house rose. Flood waters came up. That was seen as a flood. The water coming out of the storm water drain on the road side was not seen as a flood. And these waters rushed into the gardens and the houses along that street. Then there was an argument about who was insured and who was not. Different households were with different insurance companies. Sometimes the same insurance assessor was used by different insurance companies. The assessor made the arguments. But the companies made different decisions about what insurance was going to be paid. This confused people and made them very angry. It was very bad for the industry. They need to be on top of that.

Coming back to the issues, sometimes it does not matter how good a plan you use. You can still run into problems. But with the high-tech spatial stuff that we have today you can certainly plan a lot better. This will help municipal planners to decide where we can build as they will see where river courses are and where the water runs. If we could document all the history that we already have sitting around, that would give us a great deal of help in being able to put in place a proper process for urban planning in the future. Some places where we should not build will show up. If somebody wants to build there and take the risk, then you could offer them the opportunity to do that. But they would not get insured. As long as everybody understood that and got it, that would be okay. It is not good calling foul if you have built somewhere dangerous. And that goes with fires as well. We need to be a lot smarter about where we let people build and about how we look after fire-prone areas.

Where people build is defined by planning laws. I remember that in my home town of Longford there was a back creek, which ran into the South Esk. The planning for this town was defined by the 1929 flood. The 1929 flood was a very large flood in northern Tasmania. A king tide in the Tamar River came right up to Launceston, flooding all of Invermay, with a lot of that area inundated and put totally under water. The South Esk backed up right into the hinterlands and the township of Longford was totally inundated, with the back creek also catching a lot of rainfall from the mountains. Those flood levels defined where you could build in that town. It was not until recent years that mitigation through building a flood levy changed that. Now a new regime is operating. That town has a very fine school, fine clubs and two chemists and it should have the opportunity to grow and meet people's building needs. The importance of the insurance industry, which I mentioned earlier, goes back to those days of liability.

Also, on this occasion I take on board that in crises like those we have seen in New Zealand and in Japan the insurance industry—which is a very important industry for any community—would need help to look after those things, but in the normal circumstances that we have been experiencing in this country those industries should be much more advanced in where they are going to be into the future. When we start thinking about climate change and some of the issues that can come out of that, I believe that the industry needs to be on the front foot, not on the back foot, where it has been for some time. I also believe that improved spatial technology should allow us to do a lot more in being able to get our municipal planning into some level where people are not building on flood plains and where we can overcome many of these problems into the future. I do not say that we can overcome them all, but we should be able to overcome many.

So I believe this bill is the start of the process. There is much more we can do to allow and get insurance companies to do their work better and to be proactive but to ensure that there are fair parameters under which to work, much as we did with the public liability. I believe that this bill will do that and that it gets us there. It is certainly a bill that gives us a good start in sorting out some of the basic problems, which included the definitions around flooding. I support the bill.

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