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Tuesday, 14 June 2011
Page: 5934


Mr RIPOLL (Oxley) (21:35): I want to talk tonight about the issues of insurance and underinsurance and the way that impacts on people's lives, in particular those in flood zones. Those of us from Queensland have experienced quite devastating impacts. Some of the worst flood affected suburbs of Brisbane and Ipswich are actually in my electorate of Oxley. Places like Goodna were particularly hard hit, whether it be residential or commercial buildings, as were places like Jindalee and all the centenary suburbs, Westlake, Riverhills and Sumner, just to name a few. In all there were about 17 suburbs that were flood affected in my electorate. My office is still helping constituents who lost everything in the floods and who were without insurance or found that they were not covered at all for the floods. There are desperate people finding themselves in dire circumstances and situations which they were not prepared for. They thought they had paid for insurance and they thought they were covered, but in the end they were not.

We have all heard the stories of bad behaviour. There are also stories of good behaviour. There are stories of some insurance companies that actually did pay people out. While they are in the minority, there were some. Many people have taken to insurance companies, as has the government, in a range of areas and put the pressure on to make sure that they do the right thing, that they do not play with the technical or legal aspects of the policies, that they honour policies where those policies covered floods, and that people who paid for 10, 15 or 20 years for cover are paid out on it. Companies who assessed and paid out claims quickly, allowing victims to get on with rebuilding their lives, should also be congratulated. Insurance companies received more than 120,000 claims and paid out more than $1 billion in the recent floods and cyclone. It is an enormous number of claims and an enormous amount of money, but that is what insurance is about. It is about making sure that you have cover for those bad times.

Statistics, though, show that in Australia we spend less on insurance relative to our wealth and population than many other industrialised nations. In fact, we are one of the lowest spending. As the Assistant Treasurer recently stated, if insurance products are fair and reasonable and people who can afford insurance choose not to take it out then that is their issue. But, if people cannot afford insurance and therefore they do not take it out, that is our problem. We ought to be looking much closer at the underinsurance issue in this country. We know that the most likely to be underinsured or to have no insurance at all are low-income earners. Many people in my electorate either could not afford the insurance or simply could not get the insurance. They are often the people who can afford the least to lose what it is they should be insured for. Unfortunately, flood waters do not recognise the income levels of their victims. The government is determined to act on the insurance problem highlighted by the floods. I think they really did centralise our focus and our thoughts on what natural disaster can mean, whether it is a flood, a fire or any other natural disaster, if you are not insured properly, whether that be underinsurance or no insurance at all.

We are proposing a plain English, easy-to-read key facts document to be included with all new policy documents that allows consumers to see at a glance what they are and are not covered for. People ought to understand at the primary level what it is they are covered for. The biggest issue and the greatest angst and level of anxiety faced by my constituents had to do with the fact that they thought and believed they were covered but then their policy said that they were not in technical terms.

We have just released this issues paper, and I think it is a good paper. It highlights some key stats and, in particular, that of the approximately 6.2 million homes in Australia some 400,000 may be exposed to some flood risk. Around 250,000 are at low risk, 150,000 are at high risk and 50,000 are at a very high risk of flooding. Currently there is little chance of a totally competitive market for medium- to high-risk properties, as many insurers may tend to price themselves out of this market. The issues paper also highlights two alternatives. One is to make flood cover automatic on all premiums and the other is to make flood cover automatic with an opt-out provision for consumers. Both these options would lead to increased flood insurance coverage. On face value, there would also be significant premium increases for customers.

The issues paper also identifies that some sort of discount is needed for those at high risk. We need to be able to balance those competing interests between those who can afford insurance and those who cannot and make sure that people who need to be covered can actually afford to be covered. It also suggests some examples of how to fund these discounts. With some sort of discount for those at high risk then premium increases will only make the problem even worse. People who need flood cover the most often cannot take it out simply because they just cannot afford it. It is important that we look closely at the floods and the recent natural disasters in Queensland and across the country and make some determinations as to the best way forward. (Time expired)