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Tuesday, 20 March 2012
Page: 2311

Senator LUDWIG (QueenslandMinister for Agriculture, Fisheries and Forestry and Minister Assisting on Queensland Floods Recovery) (17:25): I table a statement of reasons justifying the need for this bill to be considered during these sittings and a revised explanatory memorandum relating to the bill and I move:

That this bills be now read a second time.

I seek leave to have the second reading speech and the statement of reasons incorporated in Hansard.

Leave granted.

The documents read as follows—


The Insurance Contracts Amendments Bill 2011 introduces amendments to provide for a legislative framework so that regulations can be made to establish a standard definition of flood for home building, home contents, small business and strata title insurance policies and a Key Fact Sheet in relation to home building and home contents insurance policies.

What this Bill shows, once again, is that this Gillard Government is both pro business and pro consumer.

This Bill delivers on the Government's commitment to provide consumers - everyday individuals, modest hardworking families and striving Australian enterprises -- with a better understanding of what is included in their insurance policies and in particular, the extent to which policies provide cover for flood and what cover for flood actually means.

In recent times there has been a distressing increase in the occurrence of major natural disasters.

In 2009, the Black Saturday Bushfires spread across over 450,000 hectares in Victoria.

In 2010-2011, areas of Queensland, New South Wales and Victoria experienced severe flooding with Queensland also suffering the effects of Cyclone Yasi.

A substantial portion of the financial costs of losses resulting from these natural disasters was met by insurance with claims estimated at $3.64 billion for Queensland alone.

These catastrophic events highlight the importance of insurance and making sure that individuals, families, communities and governments have effective insurance cover in place to guard against and recover from disasters.

In April, I released a consultation paper, "Reforming flood insurance: Clearing the waters".

It contained proposals for a standard definition of flood and a Key Fact Sheet -- both of which were designed to ensure insurers communicate more effectively with consumers. Industry and Consumer groups indicated broad support for these measures.

This Bill will implement these proposals with the aim of helping consumers make effective decisions in relation to their insurance needs, through increased clarity and accessibility of key information.

Standard definition of flood

Schedule 1 to the Bill will amend the Insurance Contracts Act 1984 to introduce a legislative framework for standard definition of the term flood for home building, home contents, small business and strata title insurance policies.

This should have been done years ago --- indeed it ought to have been done decades ago. The confusion has lingered on for far too long.

So I am pleased the Gillard Government has demonstrated our willingness and capacity to grasp the nettle and, with the collaboration of industry, clarify for Australian families and businesses what constitutes a flood.

The definition is designed to provide a clear and easily understandable meaning for what is commonly known as riverine flooding, namely the covering of normally dry land with water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse or alternatively, any reservoir, canal or dam.

A standard definition of flood will reduce consumer confusion regarding what is and is not included in insurance contracts. It will also avoid situations where neighbouring properties, affected by the same inundation event, receive different claims assessments because the policies covering them use different definitions of flood.

Further, this measure will improve consumers' ability to evaluate potential insurance policies and compare 'like' products between different insurance providers.

Whilst the measure will not mandate the inclusion of flood cover in all insurance policies, it will ensure that whenever the term flood appears in any of the relevant classes of insurance contracts, it will be taken to have this meaning. Insurance contracts must not include the term flood (or any related terms) except in association with the proposed definition. This restriction will also prevent relevant contracts from including compound phrases based on the term flood (for example flash flood or accidental flooding).

The detail of this measure, including the actual wording of the standard definition, will be made in regulations contained in the Insurance Contracts Regulations 1985. Draft regulations containing these measures are expected to be released for public consultation by the end of the year.

Key Facts Sheet

Schedule 2 to the Bill will amend the Insurance Contracts Act 1984 to provide a legislative framework to allow regulations to be made to introduce a requirement for insurers to provide a Key Facts Sheet outlining key information in relation to home building and home contents insurance policies.

The Key Facts Sheet will enable consumers to access key information in relation to home building and home contents insurance policies in a concise and easy to understand format. This will assist consumers in making more appropriate decisions when entering into these types of insurance contracts.

In order to ensure consumers are able to effectively utilise the Key Facts Sheet, insurers will be required to provide this document to consumers as soon as they have requested information on the particular policy.

The introduction of the Key Fact Sheet 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 informed decision making.

The detail of these measures, including the specific content of the Key Fact Sheet, will be made in regulations contained in the Insurance Contracts Regulations 1985. The draft regulations containing these measures will be released for public consultation in the new year. The Key Fact Sheet will be consumer tested before being finalised.


The Gillard Government is committed to improving the insurance market in Australia and we have announced our response to the recommendations put forward by the National Disaster Insurance Review to provide an improved insurance market for all Australians.

I thoroughly believe that in some unexpected, unsought for and undesired way, natural disasters do tend to help us in Australia to rediscover and remind us of our greatest strengths.

In this great continent that we call home, we are witness to the physics and chemistry of Mother Nature working their way across the lucky country in a way that makes you question that famous tag, 'lucky', that's famously attached to Australia.

But if we remain strong and resolute in the way that we pull together perhaps 'lucky' is still the best way to think, despite all that brutal water, wind and fire.

In doing this though we should of course never take our communal good fortune for granted.

This legislation is mindful of our good fortune, even in tough times --- and our communal fellowship, whatever the prevailing winds.

The amendments in this Bill are an important first step in improving Australia's insurance market through better disclosure of insurance cover for consumers -- and clearing up the lingering confusion.

Further details of the amendments are contained in the explanatory memorandum.




Purpose of the Bill

The Insurance Contracts Amendment Bill introduces amendments to the Insurance Contracts Act 1984 for a legislative framework to allow regulations to establish:

a standard definition of 'flood' for riverine flooding for Home Building and Home Contents (combined or individual contracts), small business and strata title insurance contracts; and

a Key Facts Sheet to provide consumers with key information regarding Home Building and Home Contents insurance contracts (combined or individual).

Reasons for Urgency

To ensure the policy intent of the two measures contained in the Bill can be achieved regulations are required to be made. The making of regulations cannot occur until after the Bill has received Royal Assent.

Debate adjourned.