The Commonwealth has accepted a proposal to introduce a standard definition of flood and compel insurers to include a flood cover option in all home and contents insurance. This will mean consumers (generally) get two prices in an insurance contract offer: with and without flood cover.
In high risk areas insurance with flood cover will often be extremely expensive. The inquiry recommended a government subsidy, but the real problem in many cases is that planning laws have failed in the past and homes should never have been built in those high risk areas. Whether or not taxpayers want to subsidise the insurance on those homeowners (and tenants) is a difficult question, and one the government is still thinking about.
Nevertheless a standard definition is undoubtedly a welcome improvement. It will make comparing insurance policies easier and mean that fewer consumers will be shocked to find out that their flood cover didn’t extend to things they expected it too.
Minister Shorten’s media release advises as follows
Standard definition of ‘flood’
“The Gillard Government will introduce a standard definition of ‘flood’ to ensure we don’t have a repeat of what happened after last summer’s floods, where people with insurance policies with one definition of ‘flood’ received compensation while people living next door, with a different policy and different definition, received nothing at all.”
“Many families and individuals affected by the 2010 and 2011 floods were not even aware their insurance did not cover flood. All policies that offer flood insurance will be required to contain the standard definition and this will end the confusion.”
“The Government will release draft regulations about the standard definition for consultation by the end of the year:
Flood means the covering of normally dry land by water that has escaped or been released from the normal confines of:
A. any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
B. any reservoir, canal, or dam.The standard definition of ‘flood’ will be used if the insurer offers flood cover in their home building, home contents, small business and strata title insurance policies.
Mandatory opt-out
The Government is also consulting on a proposal that all insurers must offer flood cover as part of home building and home contents insurance policies, while giving consumers the opportunity to ‘opt-out’ of that cover.
Stakeholders will have the opportunity to comment on the proposal, following the release of a consultation paper today.
“This proposal will increase the availability of flood insurance across Australia, while improving transparency and choice for consumers,” Mr Shorten said.
See also this story on PM quoting CFA Associate Member Queensland Legal Aid’s Catherine Uhr.
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