Enough is enough. The diabolical mess surrounding flood insurance must be resolved now before even more Australian families are sent to the financial brink at their time of need.
As we watch the flood devastation around the country, understand that up to half those affected will not be covered by insurance - even though they have a home and contents policy and think they’re protected.
The reason is the small print in their policy (be honest, how many have actually read that bit?) and the fact that many insurance companies have had their fancy lawyers draft definitions of “flood” which don’t actually payout on a flood situation.
Since 2003 the Federal Government (so both sides of politics) has been negotiating with the Insurance Council of Australia to work out the issue and have yet to reach an agreement.
Eight years of negotiation. Give me a break.
Stop the talk, stop the stalling, we need action now.
Here’s the problem.
Not all home and contents insurance policies automatically cover floods. Some specifically exclude it and a home owner has to take out a separate flood policy.
Suncorp is the only insurance company which offers automatic flood cover in their standard policy for all types of floods.
Secondly, the definition of what constitutes a flood can change from policy to policy and those definitions are pretty woolly.
A general rule of thumb is that if the flood damage is caused from the sky above (a storm), then you’re covered.
If the flood damage is caused from below (like from a swollen river, creek or stormwater drain) then you’re not covered.
How crazy is that? And don’t argue about how the river and creek were swollen from above. That logic won’t wash with the insurance companies and their lawyers.
A Queensland chicken business tweeted me saying their insurance company has told them that they won’t pay out because the policy covered flash flooding and not a normal flood. WTF!
So a flash flood is covered but not when water levels rise.
Ordinary, hard-working Aussies doing the right thing, paying their insurance premiums for years thinking they have protection are left in the lurch. Dudded at a time of disaster.
To make matters worse, insurance companies are excluded from Federal laws covering unfair contracts. Which means insurance companies can get away with contract murder.
It has to stop.
Firstly, bring insurance companies under unfair contract laws so their policy fine print can be held accountable like most other industries.
Secondly, agree on a simple standard definition of a flood. None of this fancy lawyers jargon aimed at finding as many loopholes as possible.
Thirdly, make flood cover an automatic inclusion in every home and contents insurance policy. If Suncorp can do it why can’t every other insurance company?
We’ve started a campaign to get this done on Sunrise and have received widespread support but it has also attracted some criticism:
“Won’t it put up everyone’s insurance premium even it you’re not in a flood affected area?”. No, because the insurance company would price each policy according to its risk to flood. Suncorp does it this way. If you’re in a flood-prone area you pay a higher premium, if you’re not you pay a lower premium. Simple.
“Wouldn’t the premium for flood-affected areas be so high that it’d be unaffordable?” That’s the homeowner’s decision but at least it’s their decision to make. If the premium is too high then they could have the option to exclude flood cover to bring down the premium.
But they are weighing up the risk and making the decision rather than assuming it’s part of a policy when it’s not.
Suburbs along the Brisbane River, for example, are pretty fancy. The houses are expensive (and presumably the owners rich) so they could afford it.
In regional areas, if the premium is high for a flood-prone property the owner has to decide whether they really want to live there. If they do, then they have to weigh the risk of living there with or without insurance cover.
Again, they are making the decision and are aware of the facts.
“Won’t compulsory flood cover send insurance companies broke?” It shouldn’t because they will price each property and each policy according to the risk.
I’ve had plenty of other suggestions ranging from a flood levy on all our insurance policies (similar to the fire levy) through to a Medicare-style levy on all wages and a national flood insurance scheme like what happens in the US and New Zealand.
But I reckon my three steps are a good start.
By the way, local councils and planning authorities have a lot to answer for as well.
Sure some of these floods are a once-in-a-generation occurrence, but it seems councils have agreed to massive residential development in flood-prone areas. Surely they must be held to account for these decisions and new restrictions imposed on where future developments are approved.
Let me know what you think.
I just hate to see hard working Australians sent broke at a time of dire need because they’ve been mislead by a greedy insurance industry.
Remember, it could have been you.
www.ThePunch.com.au
18.1.11
