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Govt reforms aim to fix flood insurance
All home and contents policies will be required to include flood insurance with a standardised definition under new proposals announced by the Government.
Insurers would also be able to give consumers the option to 'opt-out' of flood insurance - but insurers must notify people about any potential flood risk before they can opt out.
Assistant Treasurer Bill Shorten said that after the Queensland floods of 2010 and 2011 many people did not know if they had appropriate flood insurance.
"All policies that offer flood insurance will be required to contain the standard definition, and this will end the confusion," Shorten said.
Under the draft regulations, the standard definition will be open for consultation until the end of 2011. The definition states:
"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."
Law firm Slater & Gordon welcomed the new definition and mandatory opt-out, with commercial and project litigation national practice group leader James Higgins pointing out that the overwhelming majority of Australians live near a coast or river.
"A mandatory opt-out regime would greatly bolster the number of Australians with an appropriate level and type of flood insurance, whilst maintaining flexibility for those people who genuinely don't require flood coverage," Higgins said.
He added that the reforms would ensure the insurance industry was held to account in its dealings with policyholders.
"People who acquire insurance products do so because they want a sense of security that their property is safe in the event of adverse events," Higgins said.
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