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Tuesday, 13 March 2012
Page: 2714


Dr STONE (Murray) (21:01): As we speak in this chamber tonight about the Insurance Contracts Amendment Bill 2011, the small community of Barmah is bracing itself for floodwaters which could wipe that small town out. That community has come at the end of a long string of small towns that have experienced floodwaters over the last 10 days. Just up the basin or flood plain from them is the small town of Nathalia, which has received national attention as it battled its floodwaters with an innovation of a large aluminium levee, admittedly a levee supplemented by some 300,000 sandbags. But the town of Nathalia refused to evacuate. The vast majority of people fought to have its houses and industry saved from the floodwaters. Then there were Tallygaroopna, Congupna, Katunga, Katamatite, Tungamah, Naringaningalook, Shepparton East—those small communities were all in the last 10 days or so fighting for their homes, for their businesses, for their farms and they would have been so grateful if years ago this government had got around to a common definition of flood.

The definition of flood is one of the key components of this bill tonight. We so much need a nationally agreed definition of what a flood actually is. We have found that insurance companies play with the terms and hope that they can get away with a flood definition that they do not have to pay out on, for example, a 'storm event'. So many of my constituents cannot get flood insurance because they live on a vast flood plain. But when you have, as we did in this instance, 12 inches of rain over three days—that is, 300 millimetres, nearly the annual rainfall, in just three days—that is a storm event when it falls down upon your home. The roof of your house takes in water and it is a storm event. But we are finding already that different insurance companies are saying: 'We are very sorry. We know you are in deep strife there—you have lost your place; you have been under water for 10 days and will be under water for another couple of weeks—a metre at least, perhaps two—but we're quite sure that we won't be able to do anything for you.'

This is a serious problem in Australia. We are a place of droughts and flooding rains; we understand that. But we must have a standard definition of flood, and that is the main purpose of this bill, as I said. We are very much looking forward to seeing how that definition will be worded. We have to be satisfied that the definition chosen is adequate, and there are some recommendations from various inquiries about how that wording might be framed. It is a shame that we could not have seen that definition in advance to be able to be more comforted by this bill before the House tonight.

The second component of this bill is the provision of a sheet of key facts to be given to policyholders. This is also a very good idea, and we support the concept. But we want to know more details. We need to be sure that the regulations that go with this bill identify through the key facts sheet the different terms by different insurers. Is it something that is supplied annually with the renewal of a policy? Is it something that you would find if you seek it on a website? How is the key facts sheet to be supplied? Is it going to be guaranteed to be in plain English? Are we going to have someone oversight that, if there are complaints about it still being so complex that you need a legal opinion to define just what is contained in the key facts sheet? We support both of these elements of the bill. We just wish there was more detail at this stage to be sure that we are going to get something right.

The other problem with this is that these are baby steps. I was very pleased to take part in a recent inquiry by the House of Representatives Standing Committee on Social Policy and Legal Affairs into the operation of the insurance industry during disaster events. Volume 1 has been tabled and it is a very excellent report. We just wish that this bill had contained some of the recommendations that we found were very important as we went all through eastern Australia and into Western Australia looking at the disasters that had occurred in the last 12 months to two years.

When we looked at the responses of different insurers, we found so much evidence of insurers who were delaying assessors arriving and different insurers having different decisions about the type of disaster event for different claimers in the same street, as was the case in Queensland. We found people still waiting for assessors to arrive 12 and more months after the initial event.

I am not surprised at that, but it was shocking when one of my constituents from Shepparton East, after 12 inches of rain fell on her home in just two to three days, contacted RACV, her insurer, asking urgently for an assessment and was told, 'We really think this is probably a flood, so your claim is probably not going to make it and, by the way, we are very busy and we won't get an assessor near you for at least 12 months.' This is extraordinary. The woman making the call was pregnant; she needs a home for her family. She needs to have her house fixed as fast as possible. Her husband is very concerned that, if they have to wait 12 months for an assessor, they are not going to be able to get good value for money, and what are they going to do about their family's living arrangements in that intervening time?

The insurance inquiry undertaken by the House of Representatives Standing Committee on Social Policy and Legal Affairs recommended, for example, that we must have a national flood overlay that means that insurance companies do not simply employ anyone that they like to call a hydrologist and then, no matter what their qualifications, take that assessment of the situation as either supporting the claim or ruling it out of order completely. We recommended that claimants had to be informed about the qualifications, the employer and the role of external experts that are appointed by their insurers to help interpret their claim. We recommended a maximum of 12 weeks for external experts to provide the reports.

In relation to the floods now devastating parts of my electorate, some of my claimants, in contacting their insurers, have been told, 'We're busy and it will take a very long time to get to you.' That is not good enough in this time of emergency. We recommended in our inquiry a maximum time frame for accepting or denying a claim. We recommended a time frame for responding to requests for information—not just a call centre to tell people over the phone that they were not likely to succeed with their claim and, really, not to bother anybody again. We recommended an undertaking to communicate all decisions about insurance claims to the claimant in writing, with clear and explicit reasons relating to that particular claim. We recommended a time frame for informing claimants of the progress of their complaint or dispute.

That would all seem to be common sense, but, come a disaster, the insurance industry is allowed to ignore its code of conduct. The code of conduct is in fact not mandatory; it is just voluntary. Therefore it is the goodwill of insurers as to whether they take any notice of their code of conduct at all. Through our inquiry and also through the two floods that have devastated my electorate in the last 14 months, I have found that insurers will very often do all they can to ignore the code of conduct, whether it is during an emergency or not.

We also found that insurance companies were not telling their claimants about the internal dispute resolution processes within their company nor about the Financial Ombudsman Service, which is specifically paid for by the insurance industry to investigate claims that have not been resolved to the satisfaction of everybody. The Financial Ombudsman Service was the best-kept secret when it came to claimants and what they were trying to progress as they battled the insurance companies for a fair deal.

This bill, as I say, is baby steps in the right direction, but a lot more has to be done, and most urgently. We really do need that national flood overlay. There was a recommendation in the Shorten inquiry that it be a web based data set, perhaps maintained by Geoscience Australia. That is so important in a country like ours, which has numerous flood overlays provided, some by catchment management authorities and some by local government agencies. Some are very old and out of date. Some are now out of date because levees have been built or removed since their time of initial development. I would argue that these flood overlays are as important as the common flood definition, and of course easy communication in the sense of a key facts sheet is just common sense. It seems extraordinary that we have to legislate for an insurance company or any business at all to provide a key facts sheet to its customer or its clients in something as important as insurance.

I want to pay tribute to those who are struggling with the floods in northern Victoria as we speak because many of them know that they will never be able to insure against flood given their location and their topography on the great northern Victorian floodplains. As a nation we have to consider what those businesses, large and small, are going to do when it comes to being devastated by a once-in-100-year event like we are currently experiencing. The Nathalia abattoir was inundated just 10 days ago. Riverland Oilseeds in the town of Numurkah was affected. The hospitals at Nathalia and Numurkah were both isolated by floodwaters, with Numurkah hospital being seriously damaged by floodwaters. If those places cannot buy flood insurance or if it is offered at prices that are totally unacceptable in terms of the high cost, what are we going to do for them in order to ensure that they can be sustained over a longer period of time?

There is a failure at the moment in the insurance sector where companies like RACV and CGU are now deliberately trying to get rid of numbers of their policyholders by 200, 300, 400 or 500 per cent increases in premiums, hoping that those people will simply go away, because they just do not want to carry the risk anymore. What do those particular home owners do? They live on a floodplain, they farm on a floodplain or they have some other enterprise there and they do need to be able to ensure that they can rebuild, regroup and sustain their enterprise after this one-in-100-year event.

We lost about $2 billion worth of livestock and infrastructure in the floods of January-February 2011. The bill for this flood will probably be similar. When I flew over the area on Monday and when I drove around, as I have done over the last week, past the dead and bloated sheep floating in the floodwaters, past the fodder rolled up against the fences, past inundated dairy farms and past all of the homes that are now severely damaged, with one metre of water or more having gone through them, I kept hoping that the insurance companies to which people had been paying premiums for sometimes 20 or 30 years would look very hard at the event which led to this inundation: the three days of rainfall equivalent to an annual rainfall in our normal years. I know that already there are battles going on between policyholders and the insurance companies. I just want to give a couple of examples of the sorts of problems that we are having in my part of the world. For example, in Mooroopna, where we have had the flood very recently, I have had people who own homes discovering through their bank accounts that thousands of dollars extra had been taken out and that the cost of their insurance policy had gone up from, say, $500 to over $5,000 without their being properly informed that that had been the case. The direct debit had simply alerted them to the fact that they now had a lot less money in their bank account than they had assumed was there.

We really do have a problem with insurance in Australia. We have insurance companies that do not have a mandated code of conduct. We allow that code of conduct to be flouted completely in a time of disaster. We need to look at the recommendations of the report called In the wake of disasters, the House of Representatives Standing Committee on Social Policy and Legal Affairs report. This bill is, as I say, just baby steps and long overdue. The definitions of flood should have been made at least two or three years ago. The key statement of facts of course should happen, and it is almost childish having to make legislation in that regard. A lot of recommendations have been made through a number of reports. I am hoping that this government understands the importance of this sector and the fact that businesses and homes depend on decent insurance coverage at an affordable price and that we move on to make a great number of new pieces of legislation work, which will bring about a better outcome for all Australians and make them sustainable.