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Wednesday, 14 March 2012
Page: 2996


Mr VAN MANEN (Forde) (17:11): I too rise to speak on the Insurance Contracts Amendment Bill 2011. This bill proposes to change insurance law to introduce a standard definition of flood in insurance contracts and a key fact sheet to give people more and easier-to-identify information on their home and building contents policies, and to enable them to compare different policies from different companies.

I think it is worthwhile at this point to look at a bit of the history of this measure. The Insurance Council of Australia originally proposed a standard definition of 'flood' in 2008 following the New South Wales floods of 2007. The initial proposal by the Insurance Council of Australia was subsequently rejected by the Australian Competition and Consumer Commission following concerns raised by various consumer groups. In its statement, the ACCC encouraged the consumer groups and the Insurance Council of Australia to work together on the development of a common definition of flood which would make it easier for consumers to understand what the term means.

Before we get to the actions—or, should I say, lack thereof—of those opposite and this current government, let us look at what our wonderful consumer advocate groups have done. It appears that these consumer advocate groups have failed to follow up on the ACCC's encouragement to work with the Insurance Council of Australia to develop a standard definition of flood for insurance policies. If this is the case, and I have been led to believe by the Insurance Council that it is, then these so-called consumer advocate groups have let down the very consumers whose interests they are supposedly representing or protecting, which has contributed to costing these consumers tens of millions of dollars in the process. Equally, as I just mentioned, the current federal Labor government has done nothing to progress a common definition of flood after the ACCC scuttled the industry attempt to introduce a definition in 2008. It is interesting when you compare the wording of that proposed definition with the proposed standard wording in this bill. There are far more similarities than differences.

It has taken the disastrous floods in Queensland, New South Wales and Victoria and Cyclone Yasi in 2011 to finally get those opposite to act and realise the seriousness of addressing the issue for the victims of flooding. It has become even more relevant in the past week and a half, when we have seen flooding in southern New South Wales and northern Victoria. The government's initial step following these disasters was to commission the Natural Disaster Insurance Review in March 2011. The review recommendations were received by the government in September 2011 but were not released until November 2011, and they contained some 47 recommendations. In a stunning case of déjà vu, we remember the Henry tax review. Despite having six weeks to consider the recommendations, the government has deferred decisions on 39 of the report's 47 recommendations. In fact the government's biggest decision was to commit to further reviews. I wonder how those who have been flooded are feeling about that.

At least we now have something on the table. But this is only enabling legislation, creating the mechanism by which the regulations can be drawn up by the minister to be inserted into the Insurance Contracts Act. There are some questions as to what the wording of the regulations will be. The question now becomes: when will these regulations be announced to provide consumers and the insurance industry with much-needed certainty? I have been advised by the Insurance Council of Australia that at least five insurers have announced that they have or will be introducing standard flood definitions in their policies, and they are looking to do so in good faith in anticipation of the fact that the regulations, when introduced, will honour the key points outlined in this bill. Once again, this demonstrates the capacity of business to deal with community concerns.

This bill seeks to define the standard definition of flood, along with restricting the use of compound phrases including words such as flash flooding or accidental flooding. I think that is a very good step because there is much confusion about what the definitions in current household contents policies actually say. If I have a look at my policy, I find you need to almost be a lawyer to understand it. I am fortunate that I do not live in an area that is likely to be flooded. If I do get flooded, there will be a lot of people in a lot of trouble. However, the legislation before us today does not require all insurance policies to insure against flooding. People still need to be very mindful of what they are actually getting in their insurance policies, and that is part of the importance of the key facts sheet. The definition proposed is:

'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.

Any standard definition will not benefit current flood victims as it will only take effect once this legislation is passed and the regulations have been inserted into the Insurance Contracts Act. As the member for Longman has pointed out, the industry supports this change along with the proposed key facts sheet; however, there are still concerns about the final version of these regulations. The key facts sheet is meant to provide consumers with key information to allow them to more easily understand and compare insurance policies.

In 2012, we saw renewed flooding in Queensland, New South Wales and Victoria. As the minister was quoted saying on the ABC several days ago, already some 8,000 insurance claims totalling around $64 million have been lodged as a result of the latest flooding and, as the minister rightly pointed out, this figure will only increase. As we debate this legislation, there are still towns in Victoria and New South Wales who are affected by flooding and homeowners are still looking to sandbag and protect their properties. But it is not only homeowners; there are many small businesses in these small country towns that are also being affected. These latest natural disasters serve as a reminder of how vulnerable we all are to nature's vagaries. We need to ensure that we do everything that we can to protect ourselves and the community during these times. It is predominantly through the use of insurance in this modern age that we look to do that. That is why it is so important that these changes to the Insurance Contracts Act to provide this standard definition and to require insurers to provide a key facts sheet are introduced as soon as possible to give everybody certainty about what their level of cover is.

One of the key concerns for me, though, is that this standard definition of flood cover is being introduced after flooding events have occurred. What effect is this going to have on premiums? We have already seen or heard of instances in which there have significant increases in premiums as a result of properties being in flood-affected areas. In a time when people's living costs are going through the roof, these increased premium costs are only going to make it more difficult for people to maintain their policies. That is another reason why these issues should have been dealt with four or five years ago when the problems first arose. If that had been done, potentially the costs of the policies would have been more manageable.

While the floods last year had very little impact on my electorate, I remember the 1974 floods and the devastating effect they had on my community at that time. Two houses in my street were washed away as a result of that flooding. I saw the effect that had on the families involved. I was also involved in cleaning up other houses in the community that had been inundated. As former senior flood forecaster for the Bureau of Meteorology Geoff Heatherwick stated in the Courier Mail yesterday, it is important to remember that these past floods can and will occur again. It is only a question of when.

There are other issues to do with properties being flooded, such as town planning and development decisions. Our councils and state governments have a significant requirement on them to have a look at their policies and processes in this regard.

As my colleagues have stated, the coalition is supportive of these amendments. However we maintain our concern about whether what is outlined in these bills before us will ultimately be reflected in the regulations. Australians want certainty and the government must act now to ensure that the recommendations that have had their implementation delayed or deferred are addressed as soon as possible. There should be more than plenty of motivation in light of recent disasters to warrant a speedy resolution to this matter. The coalition await the final regulations as we want to ensure that they provide the certainty and the clarity that are required so that all parties to insurance contracts have confidence, especially the purchasers of home and contents insurance policies.