Sophie Mirabella (Indi, Liberal Party, Shadow Minister for Innovation, Industry and Science) Share this | Hansard source

I rise to support the Insurance Contracts Amendment Bill 2011 and do so with great degree of disappointment and without overwhelming enthusiasm. I think on the whole most of what is contained in the bill is a step in the right direction, but there is such a deficiency of actual substance to it that it will provide little comfort to those people who have suffered during the floods and who want greater clarity.

I also think that the Minister for Financial Services and Superannuation unrealistically raised expectations in the wake of the January 2011 floods. Those who had hoped for real, substantial measures have been badly let down, because of course, as has been said by previous speakers, and most eloquently just before me by the member for Moncrieff, the devil is fundamentally in the detail—in the regulations that will accompany this bill. All of us, not just members of the opposition but those Australians out there who are wanting to know what the government policy is, will have to wait until those regulations come out. People in my electorate do it tough. They are subject to significant natural disasters. In many ways, natural disasters, whether they be fires or floods, are a way of life for so many people in central and north-east Victoria, and something that we have learnt to live with. Where policymakers can come into play is when they can be proactive regarding policy frameworks that make it as easy as possible for people to respond to and prepare for natural disasters.

The main purpose of the bill is obviously to set a standard definition for flood. There is general agreement that it is high time that there was a nationally agreed definition for flood and that that is adopted. We all know that the insurance industry want to minimise risk and maximise return, and the ambiguity regarding a definition for flood has allowed them to pursue their commercial interests, as is to be expected. But this has left customers out in the cold, sometimes in the most atrocious of fashions. Unfortunately, we are yet to see the wording of this standard definition, so you can understand, Mr Deputy Speaker Leigh, why I am not wholeheartedly jumping for joy and embracing this legislation with great enthusiasm because it is crucial that the definition is right. It is one thing to support a well-meaning concept; it is another thing for that well-meaning concept can be incorporated in an accepted and well understood, simple definition.

The second component of the bill is the provision of a fact sheet for policyholders. Again, it is a noble concept and a sensible proposal. But the lack of detail about when the fact sheets will be made available, what they will contain, what they need to contain and whether the language is simple make it difficult to pass judgment until we actually see the regulations. The Natural Disaster Insurance Review put forward some very sensible suggestions—and it did raise the expectations of many people in the electorate. A key recommendation is the mandatory application of flood cover, but with a requirement to provide an opt-out clause. The importance of this recommendation was brought to light this year in my electorate when the RACV made the decision to apply flood cover to all insurance policies without giving customers the ability to opt out. The day the policy renewal invoices were sent out, my office was inundated and the phones ran hot. I am told that there was a 50-metre long queue outside the RACV offices in Wodonga. I spoke to countless customers whose insurance premiums skyrocketed overnight.

Just to appreciate the anxiety that this caused, I will list a couple of examples of the overnight increases in the insurance premiums. Joan from Park Lane in Wangaratta has lived in her house for 15 years. She has seen several floods in her time, none of which have impacted on her property. Yet her insurance premium rose from $540 a year to more than $3,000 a year. That is an increase of more than 550 per cent. Dianne from Martin Place in Wangaratta saw her premium go from $1,188 a year to $9,552 a year. That is an increase of more than 800 per cent. Chris Blake from Mansfield has never seen floods pass through her town before and her house has never been impacted, yet her insurance premium went from $470 to $2,400. That is an increase of 500 per cent. Chris has been looking elsewhere for a new policy, but is finding it increasingly difficult. AAMI quoted her $5,000. Most insurance companies in fact will not even give her a quote at all. This goes beyond just the RACV. I fear these problems will spread unless something is done soon. Giving consumers the choice of insurance by opting out is a very sensible suggestion, so they can decide the level of cover that they can afford and the risks with which they can live. I have had countless examples of consumers—just like the ones I have mentioned, constituents of mine—who have been left high and dry by their insurers. I think it is important to quote these examples, because I have heard some very questionable statistics floating around about how few customers will be impacted by the decisions of companies like the RACV. I would be more than happy to put forward these examples to the minister if they would assist him in progressing his deliberations on the very important issues and recommendations raised in this review.

This particular issue does go deeper. I have also spoken to local insurance brokers, and they have told me that some insurance companies have just left some parts of my electorate altogether. What happens when it comes time to sell a property that cannot be insured for under $10,000 a year or that cannot be insured at all? If this particular practice spreads, we will have a crisis in the housing industry in some parts of this country. Who on earth is going to buy a property that cannot be insured, or that costs more than $10,000 a year to insure?

So this does need urgent attention. I understand the minister is looking at the legal consequences of a proposal to introduce mandatory flood cover with a compulsory opt-out proposal. I look forward to advice on this matter in the near future. It is absolutely critical to many people across the country—in capital cities and in the regions—who are experiencing great anxiety and uncertainty, not only about their insurance cover but also about the value of their primary asset, which is their home. I hope the minister does move quickly, because many of my constituents are being left uninsured in the meantime.

On a final point, the NDIR proposed a national flood overlay map. This is a very important recommendation. One of the problems customers face when their insurance companies tell them they are in a flood zone is that it is very difficult to make a compelling argument in response. Local knowledge and experience does not really carry much weight. Insurance companies are not required to disclose their flood map data, which puts customers in a particularly disadvantageous position if they do not agree that they are in a flood zone. A national flood overlay map would empower customers to appeal, by providing them with nationally consistent, high-quality data. I hope the government gives this due consideration, because it is a sensible proposal.

In summary, I support the bill before the House, but it is only a very small step—and, in many ways, a motherhood step. The substance will be in the regulations and that is where we will assess the details to ensure that they are adequate and live up to their promises.

There is much to be done, and many Australians will be watching very closely to ensure that the minister's rhetoric during the floods of 2011 is backed up with substantial policy responses and real legislation that address the fundamental problems that are crippling many homeowners at the moment.

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