Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Hansard source

I thank honourable members for their contributions to the debate on the Insurance Contracts Amendment Bill 2011—including the member for Indi for her charming contribution. I note that she was attacking the government for making statements; it puzzles me somewhat why the coalition when they were in power failed to do any of what we are doing, because floods are not new. This government has acted. This bill will implement measures to assist consumers to make effective decisions in relation to their insurance needs through increased clarity and accessibility of information.

Schedule 1 of the bill will amend the Insurance Contracts Act 1984 to provide a standard definition of 'flood' across all home building and home contents insurance policies, and to extend this definition to cover small businesses and strata title bodies corporate. The definition provides a clear and easily understandable meaning for what is commonly known as riverine flooding—the covering of normally dry land with water that has escaped or been released from the normal confines of any lake, river, creek or any other natural water course or alternatively any reservoir, canal or dam. This measure will reduce consumer confusion regarding what is and what is not included in insurance contracts. It will avoid situations in which neighbouring properties affected by the same inundation event received different claims assessments because the flood policies covering them used different definitions of flood.

This measure will also improve the ability of consumers to evaluate potential insurance policies and compare like products with different insurer providers. I have moved amendments to the bill to ensure that the standard definition of 'flood' can operate as intended. The amendments respond to concerns raised by insurers in consultation with the House of Representatives Standing Committee on Economics as outlined by the committee's advisory report on the Insurance Contracts Amendment Bill released on 17 February 2012. I note that the House of Representatives Standing Committee on Economics recommended that the House of Representatives pass this bill. The details of the standard definition of 'flood' will be included in the regulations. Draft regulations were released for consultation late last year and Treasury will be undertaking further consultation in order to ensure that the wording and application of the standard definition is appropriate.

Schedule 2 of the bill will amend the Insurance Contracts Act 1984 to implement a requirement for insurers to provide consumers with a key facts sheet for home building and home contents insurance policies. This measure will make the purchase of home building and home contents policies simpler for consumers by assisting them compare policies with a consistent document and by facilitating more informed decision making.

On 29 February 2012 I released a discussion paper on the key facts sheet, which seeks stakeholder views on the format, content, structure and provision of the key facts sheet. Feedback on the discussion paper will allow the government to develop a prototype key facts sheet, which will be consumer tested. Once consumer testing is finalised, regulations will be made to give effect to the key facts sheet.

Some opposition members, as is their wont, have criticised the government for including elements of the standard definition, including the prescribed contracts to which it will apply and the wording of the definition in regulations. The prescribed contracts to which the standard definition of 'flood' will apply will be contained in regulations. This is consistent with the location of the standard cover regime for standardised contracts and reduces the potential for unintended consequences for both consumers and insurers. This is particularly important given that the standard definition will apply to small business and strata title policies. The wording of the standard definition of 'flood' will also be contained in the regulations. This will ensure that the policy intent of the new standard definition of 'flood' can be achieved in a simple and effective way and will safeguard against the potential for the standard definition of 'flood' to apply inappropriately.

The consultation process that the government has undertaken has been transparent and thorough. In April 2011 the government released a discussion paper that contained the proposed definition. The Natural Disaster Insurance Review considered this issue and in its final report recommended the adoption of the government's preferred definition. The government is now undertaking a final round of consultation on the wording. Both consumer groups and the insurance industry have publicly supported the government's preferred definition, in many cases expressing pleasure that at last a government has acted after 40 or 50 years—far too long.

The details of the key facts sheet for home building and home contents insurance policies will be contained in regulations, which is consistent with other similar one-page disclosure documents, such as the home loan key facts sheet.

In conclusion, this bill delivers on the government's commitment to provide consumers with a better understanding of what is included in insurance policies.

Question agreed to.

Bill read a second time.

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