What Defines A Flood? Soon, Even Insurers Will Have To Agree
The recent heavy rain, swollen creeks and rivers in northern NSW may have left you with soggy carpets, destroyed furniture, busted electrical equipment and even washed away goods and chattels.
So you reach for your insurance policy thinking alls fine, youre insured and youll get a cheque in the mail pretty quickly to help you pick up the pieces and start again. Thats why you paid for flood insurance, right? At last its going to pay off.
Think again. A year after the Queensland floods more than 4,000 insurance claims have still not been finalised 15 per cent of all claims stemming from the devastating floods that hit Brisbane and the interior.
Many people found what they thought were floods werent floods as far as the insurance company was concerned, and they refused to pay up. Some insurers argued floods came from storms, not rivers overflowing. Some insurers argued water damage only covered water falling from above, such as from holes in ceilings or broken guttering, not water rising from the ground.
Others argued flash floods were not covered. Some flooded people found their neighbours were paid while they were not.
Public outrage prompted a federal government review which called for a standard definition of flood, greater coverage and easier to understand insurance policies.
It concluded every home and contents insurance should have the same standard flood insurance, defining a flood as the covering of dry land by water that has escaped or been released from the normal confines of:
- a lake, river, creek or other natural watercourse
- a reservoir, canal or dam.
One would think this was pretty obvious but where theres a law theres always somebody looking for a loophole.
Last November the federal government introduced to parliament the Insurance Contracts Amendment Bill 2011. It provides a legislative framework to introduce the standard definition of flood into insurance contracts.
The Insurance Council said the new standard definition will be quickly implemented by the industry and inserted into all home and contents insurances as soon as the change was written into federal legislation.
The trouble for sodden folk after the recent rains as that this wont happen until mid 2012. The machinery of bureaucracy works slowly. The government is still consulting the business community and interested parties. The parliamentary Social Policy and Legal Affairs Committee is travelling the NSW and Queensland coasts in January and February holding meetings if they can get through the floods. Submissions from insurers and committee reports wont be in until the end of March.
Some insurers have already adopted the new definition. Until every insurance company has adopted the new standard definition its wise to shop around and check the small print.