Insurers bow to clarify flood policies

The Age

Friday February 4, 2011

By CLANCY YEATES and GARETH HUTCHENS

INSURANCE companies have caved in to government pressure over their tough stance towards flood victims, agreeing to establish a standard definition of flooding and remove confusing jargon from policies.Facing a backlash after many policyholders found their flood cover excluded damage from rising rivers, insurers yesterday conceded the need for change in the industry.After meeting the country's biggest insurers, assistant treasurer Bill Shorten said they had agreed to develop a common definition of a flood, and to write policies in plain English.As well, Mr Shorten said the government might consider ending a controversial exemption that leaves insurers outside the scope of unfair contract laws.Flood damage has led to 40,000 insurance claims worth $1.5 billion in Queensland and 4500 claims in Victoria. It was too early to gauge the cost of cyclone Yasi, Mr Shorten said.A common definition is intended to improve people's understanding of their insurance coverage and prevent insurers from dodging payouts. Insurance policies can currently distinguish between flash flooding, inland flooding and "actions of the sea".Insurance Council of Australia spokesman Paul Giles said the industry had long favoured a common definition. However, he said agreeing on a standard definition would not bring about universal cover against floods ��� this would remain a matter for consumers.

© 2011 The Age

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