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Wednesday, 14 March 2012
Page: 2980

Mr STEPHEN JONES (Throsby) (12:30): A year ago today a terrible tsunami hit the north-east coast of the island of Honshu, Japan. We have spent a good amount of time appropriately this morning debating a motion in tribute to the people of Japan. We expressed our sympathy as a parliament for the suffering that they have undergone and congratulated them on their recovery efforts. In preparation for that debate, I took time to go through some of the reportage of the event, particularly from Japanese newspapers. I came across numerous stories about reports of discoveries of ancient stone markers on hillsides around some of the devastated villages. Those stone markers were like a warning from ancient generations to current generations not to build below that point.

The reason that those markers were placed somewhere halfway up the hillsides, warning future generations never to build below this point, is that in the past people had experienced tsunami damage—the wiping out of villages—and they knew that it was unsafe to build in those zones. They were sending out a clarion call to future generations: beware. Indeed, before the Second World War, residents had been prohibited from building construction in those areas close to the coast that were subject to tsunami disaster, but during the postwar period there was enormous demand, particularly for affordable housing, in those areas and residential construction did proceed.

I find that story a useful segue into the debate that we are having here today about the amendments to the Insurance Contracts Act because, as the member for Wright has rightly indicated in his contribution to the debate, the renewed impetus for amendments to this legislation is the terrible floods that went through Queensland, including in his electorate, and northern New South Wales in late December 2010 and early 2011. It reminds us all that Australia is a flood-prone nation. Anyone watching the TV news in the past week will have seen the terrifying images of streets and buildings half submerged in enormous expanses of brown muddy water. It is unfortunate that these images and the flooding taking place in the states of New South Wales and Victoria, even as we speak today, are not an uncommon lived Australian experience.

Many of our first settlements in this country took place on the banks of our great rivers. Indeed, many country towns owe their existence to being in places where river crossings could be made. The Insurance Contracts Amendment Bill 2011, which is before the House today, was prompted by those terrible events in December 2010 and 2011. Those events remind us, in many respects, that there are many things that we need to do to ensure that we do not see the terrible suffering, the loss of life and the loss of property that we saw as a result of those flood events. Major flood events like that, which followed higher than average rainfall, had a devastating impact on those who lost loved ones and also saw their life's worth of treasured possessions disappear under a torrent of water. What is left behind is a huge task to rebuild lives, property, infrastructure and communities. Some estimates of the total cost of the 2010-11 floods are around the $10 billion mark. According to the Insurance Council of Australia, these floods resulted in nearly 50,000 insurance claims, with insurance payouts expected to be around $2.3 billion. Cyclone Yasi resulted in more than 60,000 claims, adding over $850 million to insurance claims. If you add in the cost of the floods taking place this month, the bill to Commonwealth, state and local governments will be even higher again.

The Insurance Council of Australia says that seven per cent of residential property in Australia is exposed to predictable and repetitive flooding, causing an estimated $400 million to $450 million in damages each and every year. The cost, which cannot always be measured in purely economic terms, is significant. It is also a cost that comes from the spreading of urban development.

This is where I return to the point I made earlier. In part, the bill before the parliament today is a part of the cure but it is not a part of the prevention. State and territory governments have legislation providing for affordable, intelligible third-party car insurance. These are very important, but they are no alternative to programs that are aimed at reducing bad driving. The legislation before the House today is important but it is no alternative to planning and land use policies that ensure we do not build suburbs and houses in places known to be prone to regular flooding. The challenge for state and local government planning authorities is to ensure that when they are approving new urban development, or revising existing ones, they do not put people in harm's way.

We know that the more our urban centres spread out into our flood plains, the more the risk of flood events for the households within those regions. In my own region, in parts of the Illawarra and the Southern Highlands of NSW, urban development in flood-prone areas is a live and controversial issue. In Throsby, suburbs such as Albion Park and Dapto include low-lying areas that frequently see serious flooding. Despite this, urban development marches on. To give one example, a new development approved at Calderwood, near Albion Park, will see the construction of over 4,500 new homes on what was formerly high-value agricultural land. This land, and the land around it, has been subject to regular flooding and is still subject to regular flooding. Not surprisingly, many locals and the local council have expressed concerns about this development and the cost of ensuring that it is done in a way that mitigates or reduces the threat of floods to the residents who purchase housing and land packages in that area.

The surrounding suburb of Albion Park is largely a dormitory suburb that is poorly served by public transport, so the majority of travel in this area is by private motor vehicle. Access roads in and out of these locals areas, like the Illawarra Highway and West Dapto Road, are regularly flooded and cut off. Only last March extensive flooding meant that many students of Albion Park school were forced to spend the night at their local school when parents could not get through the flooded roads to pick them up. For many who know this region well there is concern about the long-term implications to our region of the changed land use that is entailed in new housing developments.

I simply make the point that the legislation before this House, which deals with the definition of flood and the provisions of flood insurance, will not compensate for the need for credible and thorough land-use planning, particularly for suburbs like those I have just described. This is not to take anything away from the heartfelt words of members, such as the member for Wright, who have expressed the deep concerns in their communities and have reflected upon the anguish that was visited upon them by the 2010-11 floods. I am sure that each and every member in this place shares the concern and sympathy and would like to do everything possible to ensure that those communities get back on their feet. I argue that a part of ensuring that we do everything possible is ensuring that we have a coordinated approach to flood mapping and land use strategies that are about the prevention and not cure.

I turn now to the measures within this bill. I am pleased that the measures within this bill provide some important consumer protections for families and small businesses wanting to ensure that they have the right insurance protection for their homes and businesses. One part of the response that we are dealing with today is how we can ensure that consumers can financially manage the risks to their property from flood damage. The government's proposals are to, firstly, ensure that we have a standard definition of what a flood is for the purpose of insurance policies. As a member of the House of Representatives Standing Committee on Economics I have participated in a recent inquiry into this bill. As part of that inquiry the committee held a roundtable public hearing in early February to consider the proposed measures. The government's proposals for a standard definition and for a fact sheet for consumers were strongly supported by all participants at the hearing.

These standard definition of 'flood', which will be introduced as a result of this bill, describes riverine flooding and reserves the term 'flood' for flooding in this context only. The reason this definition is necessary is that there are a number of sources of inundation of water into properties. The Insurance Council of Australia has identified three broad categories. The first is stormwater or rainfall run-off, commonly referred to as flash flooding, in localised urban areas from high-intensity rainfall. This form of flooding is regularly covered by the current definitions of flooding within insurance contracts. The second is riverine flooding, which is flooding from watercourses or catchments overflowing their banks. Again, this is often covered but not always covered in standard form contracts. The third is flooding as a result of storm surge or the sea level rising. This is rarely if ever covered in any of the standard form insurance contracts. The regulations include the proposed wording of 'flood' to be used in these insurance contracts as follows:

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 primary benefit of having a standard definition is so that consumers can better understand their insurance coverage. This will also decrease the number of disputes over insurance claims, which were significant in the wake of the floods in Queensland, New South Wales and Victoria over the last 12 to 18 months. This will be an important administrative cost saving for insurance companies, who will no longer have to allocate resources to contesting uncertain definitions for flood damage and the definitions of flood damage within those insurance contracts. This new definition will apply to home building and home contents, small business and strata title insurance policies. This is a simple and practical measure that will enable consumers to make better informed decisions regarding the extent to which policies provide cover for flood, and what flood cover actually means.

The second important measure contained within the bill involves introducing a one-page fact sheet which will outline key information in relation to home building and home contents policies in an easy to read and consumer friendly layout. This measure will make the purchase of home building and home contents policies simpler for consumers, assisting them to compare policies with a consistent document and facilitate more effective and informed decision making. The detail of these measures, including the actual wording of a standard definition of 'flood' and the content of the key facts sheet, will be contained in the insurance contract regulations and will be released for public consultation. The response from the insurers and particularly from the Insurance Council of Australia has been positive. Given these measures being brought forward in the bill, it will now be important to monitor how the implementation of these will affect consumers taking out insurance in flood prone areas. It is important that people living in flood prone areas are aware of the risk of flooding and have appropriate insurance to cover this risk. The insurance industry already maps and models flood risk when determining insurance premiums, often relying on data from local and state government authorities. I support the call by the Insurance Council of Australia to ensure that we have a standard mechanism for mapping flood and flood risk. I also support the call to ensure that this information is available to all within the community to assist better land use planning and better assessment of risks for both insurers and those seeking to cover themselves against the risk of flood.

Nothing within this bill is going to do anything that will alter the climate and climatic risks but it will ensure that when the insurers are taking out a contract they can be sure of what coverage they are actually paying for. I commend the bill to the House.