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Wednesday, 21 March 2012
Page: 2416


Senator CORMANN (Western Australia) (12:16): The Insurance Contracts Amendment Bill 2012 introduces two changes, in particular, to the legislation: it introduces a standard definition of 'flood' in insurance contracts and it introduces a key fact sheet that is required to be provided for home building and home contents insurance policies. While the coalition will support the bill, we do have a number of concerns. The concerns are that, when it comes to flood insurance or to appropriate cover to deal with circumstances of floods, you would remember that, in the wake of the tragic events in Queensland early last year, Minister Shorten raised significant expectations. He was going to fix everything. He was going to make sure that every single person was not going to be left out of pocket as a result of the tragic flood events in Queensland. People across Queensland were left with the impression that he was going to solve it all. But all we have had from the minister so far, after all of the expectations he raised when he commissioned the Natural Disaster Insurance Review, is legislation which still does not even include a standard definition of 'flood' even though there has now been a consensus for many years that it is very important for us to have a standard definition of 'flood'. The government are going to say that they are going to put the standard definition of 'flood' into regulations. But, as I understand it, even to this day the government still have not been able to settle on a final definition of what a flood actually constitutes.

Following the major incidents of flooding in 2010-11 in parts of Queensland, New South Wales and Victoria, the issue of inadequate flood insurance cover and confusion as to what was covered in insurance policies became a very important and prominent issue. There were seriously damaged households with no or inadequate insurance coverage. There were wide variations in the definition of 'flood' between insurance policies and a lack of understanding of what was covered by a policy, which contributed to these gaps in insurance coverage. The Natural Disaster Insurance Review was commissioned in response to this problem on 4 March 2011, and the review recommendations were received by the government back on 30 September 2011 but then were not released until the middle of November. The report contained 47 recommendations, providing independent review of issues relating to insurance in light of the natural disasters. Despite having six weeks to consider those recommendations, true to form Minister Shorten deferred decisions on 39 of the report's 47 recommendations. Again, true to form from this minister for reviews, indecision, further consultation and more discussion papers, the biggest decision he made was to commit to further reviews.

This bill makes two changes to insurance contracts law following on from the review, as I have said: it provides for a standard definition of 'flood' in insurance contracts and requires that consumers are provided with a key fact sheet outlining key information about their home building and home contents insurance policies. However, this is enabling legislation only. Both the standard definition of 'flood' and the specific content of the key fact sheet will be made in regulations through changes to the Insurance Contracts Regulations 1985. Industry support the changes that are being proposed, but they do have some concerns about the final version of the regulations. However, in general there has been a consensus for some time now that this is an appropriate way forward, particularly in the wake of the confusion and uncertainty that surrounded the issue of insurance coverage in the wake of the 2010-11 floods.

We will be watching the final regulations closely to ensure that they provide adequate certainty to all parties to insurance contracts, because the government does not have a very good track record when it comes to this. What we have to remember is that the standard definition of 'flood' was on the table as far back as 2006-07. The government had a specific proposal in front of them in 2008. At the time this whole proposition of a standard definition of 'flood' was covered by the ACCC, and the government never had the fortitude, strength of character, persistence and determination to deal with it then. If they had dealt with it then, it would all have been in place by the time of the January 2011 floods in Queensland. But this government—because of indecision, because of delay, because of characteristic incompetence, because of their general dysfunction and because they were not able to make a decision and get past the first barrier and the first bit of resistance—sat on their hands.

Then we had Minister Shorten, after the events in Queensland in early 2011, trying to big-note himself, making himself look as if he could solve everything and raising expectations significantly—and the only response we are getting is to tell us that we need to do something that it has been agreed for five or six years now needs to be done. But still, to this day, it is not being done. We just have here an empty vessel that is before us saying, 'One day in the future we will agree to a common definition of 'flood' and might be able to reach some sort of consensus around how the regulations should be amended, but we can't tell you when that is going to be.' A standard definition of 'flood' is a very good idea. A standard definition of 'flood' will mean that every time the word 'flood' appears in an insurance contract it will be taken to mean the definition as outlined in the regulation—if only we knew what it was. The legislation also restricts contracts including compound phrases containing the word 'flood', such as 'flash flood' or 'accidental flooding'. The legislation does not require that all insurance policies insure against flooding.

If I can just pause here on this point to say that at some point the impression was created by the government that, somehow, an answer to this problem faced by people that were either underinsured or not insured at all in Queensland would be to impose compulsory insurance across the board. That would be a very bad policy approach for the government to take. We have seen bad policy approaches by this government before so, who knows, they might well have been sincere when they created the impression that they wanted to impose compulsory insurance across the board.

What we need to remember here is that, as tragic as the events around the flood are when they occurred, 90 per cent of Australians live in areas not affected by flood, 10 per cent of Australians live in areas affected by flood and some of them in areas of extreme risk. But if you impose compulsory flood insurance across the board, irrespective of whether or not people face that risk, then that is no longer insurance. Insurance is a transfer of risk. Insurance is paying a premium so that somebody else takes on the risk for you, and you can join a pool and spread the risk across that pool. If you force somebody to pay a premium, if you force somebody to pay to transfer a risk that they do not face in order to cross-subsidise across the board, that then becomes taxation rather than insurance.

It was never going to happen. As much as Minister Shorten was trying to make it look as if he was going to do something, as much as Minister Shorten was trying to make people believe that he had all the answers, when it was all said and done, all he came up with were these two proposals in this legislation which have been on the table for a very, very long time. They are two proposals which are completely non-contentious. Even with the non-contentious proposals, he still has not been able to bring them to a final conclusion.

The coalition has consistently supported efforts to develop a single standard definition for 'flood' across the entire country and across every insurance company. After the floods in New South Wales in mid-2007 and in Queensland in 2008 the common definition of 'flood' was put forward as an important change by the industry at the time. The federal Labor government did nothing to progress a common definition of 'flood' after the ACCC scuttled the previous attempts to introduce such a definition back in 2008. It took the disastrous floods of 2011 for Labor to finally consider this matter again.

The coalition supports recommendation 36 of the Natural Disaster Insurance Review that the government introduce a standard definition of 'flood' so as to avoid any consumer confusion surrounding flood coverage within insurance policies. The final report recommends the definition of 'flood' as proposed within the Reforming flood insurance: clearing the waters consultation paper which 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 water course, whether or not altered or modified or

(b) Any reservoir, canal or dam.

It needs to be noted here that, as far as I am aware, the government has still not settled on that definition or on any other definition. As far as I am aware, the government is still dithering, the government is still being indecisive, the government still is not able to cut through and make a decision. Probably it will take another flood before we finally get some action. Probably it will take another disaster before another minister—probably one of Minister Shorten's successors—will finally be able to bring this whole issue to a conclusion. It is completely unacceptable that, for more than 12 months after the tragic events in Queensland in early 2011 and for more than five years after the insurance industry first put the proposal of a common, standard definition of 'flood' on the table, we still have not got a decision from the government on what definition they want to proceed with.

So to come to this chamber with an empty vessel, with a piece of legislation that has nothing in it other than a promise that 'at some point in the future we will do something', is just not good enough. We have this empty vessel here. Enabling legislation is a technical term where the government tells us: 'We want to have, one day, a common definition of 'flood'. We want to have, one day, a key facts sheet, but we will give you all the detail that we haven't agreed to yet in regulations.'

Senator Jacinta Collins interjecting

Senator CORMANN: I can see that the senator representing the government in this chamber is getting fidgety. She is getting fidgety because she is, clearly, not entirely in agreement with the things that I am saying. I would be very pleased to engage in a thorough and comprehensive debate about the many flaws in this legislation and in a comprehensive debate about the many flaws in the government's approach when it comes to the issue of flood insurance. But, of course, the Labor-Greens government, again, on as important and critical an issue as this—what have they done? They have moved to gag debate, to guillotine debate, on this.

There is a state election in Queensland on the weekend, and the people of Queensland need to know that this Labor-Greens administration does not want to have a proper debate about the issue of flood insurance in this chamber today. We were given 15 minutes for the whole debate on the issue of flood insurance. This is all that this Labor-Greens administration thinks the discussion about flood insurance deserves. After all of the expectation that Minister Shorten raised with people in Queensland about what he would do and what he could do to address the issue of flood insurance, after he went to Queensland and raised a lot of expectations with people in Queensland, all he has delivered is an empty vessel and a promise that at some point in the future he will do a little bit. Out of all the recommendations that came out of the Natural Disaster Insurance Review his biggest action so far is to commission another review into the review. This is a minister for reviews and indecision. This is a minister that, after he receives a review, commissions a review into the review, followed by a further inquiry into the review into the review. Perhaps after that we could have a public discussion paper. That is the track record of this minister. The approach by the Labor-Greens administration to cut short debate on this very important issue on how we can improve flood insurance is just completely disgraceful.

The DEPUTY PRESIDENT: Order! The time allotted for the consideration of this bill has now expired. The question now is that this bill be read a second time.

Question agreed to.

Bill read a second time.