Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Mr Deputy Speaker Windsor, this is the first time I have spoken while you have been sitting in the chair and I am looking forward to your judicious and impartial rulings. This time last year Queensland was coming to grips with the terrible flooding that had destroyed thousands of homes and tragically claimed many lives. To all those affected then and now, this parliament on both sides is thinking of you.

Part of the recovery process involves lodging a claim against an insurance policy that was taken out to protect against such misfortune. But for some people insurance claims took months and months to settle. Some claims are still outstanding today, more than one year after the event. This has had a serious impact on people's ability to recover and rebuild their lives. Others were told by call centre staff at first instance that they should not even bother making a claim. People were contacting me for help because they were getting nowhere with their insurance company and were not aware that they could access legal aid or the Financial Ombudsman Service. This situation was not limited to Queensland. My fellow committee members all over Australia and other MPs had similar experiences in their electorates of distressed constituents getting a raw deal with their insurance companies following natural disasters that devastated the country: cyclones in Northern Queensland; floods in Victoria, Western Australia and New South Wales; fires in Western Australia and Victoria—to name but a few. The committee began to realise that many individuals and families were suffering from the huge delays to insurance claims processing, and this inquiry was in response to the many complaints about the insurance industry that too often were falling on deaf ears.

Currently there are no regulations that compel insurance companies to do the right thing by their clients and resolve claims in a timely and satisfactory fashion. The unfair contract terms laws contained in the nationwide Australian Consumer Law do not apply to general insurance contracts. Moreover, claims handling and settlement are singled out for exemption from regulation by the Australian Securities and Investments Commission, the body which otherwise has responsibility for regulating the operation of financial services.

The only curb on how insurers handle claims is their code of practice, written and regulated by the insurance industry itself. The code of practice outlines time frames for assessing claims, responding to requests for information and updating clients on the progress of claims—and sounds reasonably good on paper. However, the insurance industry wrote itself a cop-out clause in section 4 that suspends the code of practice standards in times of catastrophe or disaster—some might say the time when they are most needed. This has been a free pass for insurance companies to treat claims in whatever manner they choose when there is a natural disaster.

During the committee's travels around Australia to regions affected by natural disasters we found that often the insurance claim process had a detrimental affect on people already devastated by trauma and loss. People told us of the stress of being in limbo for months, living in caravans, friends' houses or in damaged and unsanitary homes. A consistent theme we heard across Australia was that not knowing what was going on was the worst aspect of the disaster: claims were not acknowledged, phone calls were not returned, emails were unanswered, third-party experts were sent out to properties with no explanation, expert reports were kept secret, and claims they were verbally denied with no reasons given.

The report that we table today contains recommendations that will increase consumer protections when it comes to the handling of insurance claims. It is imperative that minimum standards for claims handling in the wake of disasters are created, that the insurance industry adheres to them and that there is government oversight to enforce them. The flood events of recent weeks in New South Wales and Queensland remind us that Australia is prone and always will be prone to natural disasters. The insurance industry must ensure that it has the capacity to deliver in a timely manner on the insurance policies that the Australian public purchases for peace of mind.

I would like to thank all committee members but especially the deputy chair, the member for Pearce, for taking us to her electorate under horrible circumstances, meeting with people, and for her great contribution to this inquiry. I also thank the secretariat, who are here in the chamber today, for the great work that they did under an enormous amount of pressure, as we have inquiry after inquiry after inquiry handed to us by the magnificent people to handle such processes. I will now hand over to the deputy chair.

Judi Moylan (Pearce, Liberal Party) Share this | Link to this | Hansard source

From the outset can I also thank the chair of the committee and the secretariat of the committee for the splendid work they did to facilitate this inquiry and to reach what I think are very sensible conclusions and recommendations that I hope the government will note and act on.

The succession of natural disasters across Australia over the last four years has taken a heavy toll in human life and also in the destruction of both the natural and the built environment—not to mention the terrible heartache for many people caught up in these disasters. Our heart goes out to those who still are battling to get their lives back together again.

In the Queensland floods alone 35 people tragically lost their lives, two million people were living in declared disaster zones and 28,000 homes required rebuilding. We have also seen floods in Victoria, New South Wales as well as fires and hail and cyclones in Western Australia. These catastrophes resulted in over 185,000 insurance claims between 2010-11 and a $4.3 billion damage bill. Whilst these events placed unprecedented strain on the insurance industry, the overwhelming number of distressing experiences reported by claimants has exposed significant deficiencies in the way claims are handled and the regulatory framework underpinning the insurance industry. In investigating these issues, the committee held 18 public hearings across the country, visited numerous affected areas and received 79 submissions.

The report In the wake of disasters contains 12 critical recommendations which I urge the government to closely review and adopt. Of particular concern to the committee is the current legislated exemption of insurers, which the member for Moreton made reference to as well, from the unfair contract provisions which normally would protect consumers in other types of contracts.

People faced with the loss of their homes and businesses deserve more than piecemeal protection of their rights. The industry is self-regulated and operates under a voluntary code of conduct which, unfortunately, the Australian Competition and Consumer Commission has no authority to enforce. Time and again we have seen that voluntary codes do not work to protect the best interests of consumers and, indeed small business people. Not only must the legislative protections be strengthened; the regulatory authorities must be resourced and empowered to do their job effectively. For the benefit of both consumers and insurers, policies must be understandable. Knowing exactly what is and is not covered in plain English can make the claims process easier and prevent litigation, which, after all, is costly to everyone concerned and very distressing to the claimants.

Submissions to the committee also stressed that the whole claims process needs to be more seamless and certainly more transparent. Some recent initiatives by insurers have received praise—for instance, in my own electorate of Pearce the Insurance Council of Australia established very quickly a desk in their recovery centre following the Toodyay fires, and for that we were grateful. Their prompt response and ease of access was much appreciated by the community. But, unfortunately, a number of people said they felt let down later by the absence of follow-up in the post-claim period. The effect of delays should not be underestimated. Without prompt settlement of claims, families and communities cannot start the rebuilding process. With every delay the emotional distress builds, slowly engulfing those already traumatised by the events they have faced. Relationships suffer, livelihoods languish and the social fabric of communities can be torn apart.

So the recommendations contained in this report are much needed. With the little remaining time I have left, I draw the attention of the chamber to recommendation 12, where the committee recommends that an action group be formed to look at the reasons for market failure and the hugely escalating cost of insurance premiums to the public. In doing that they might also look at some of the systemic problems that are causing great concern in the sector, such as buildings being built in cyclone-prone areas and in flood-surge areas, as well is the ageing infrastructure for delivering power in many parts of Australia.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.