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After battling Australia floods, waterlogged citizens now fight insurers

Many whose homes and businesses were affected by the Australia floods are finding that the fine print in their insurance policies rules out coverage.

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“I don’t want to bash insurance companies, but there is real and justified frustration,” Mr. Shorten said on Wednesday. “Why do we need so much fine print? The Magna Carta, the Ten Commandments, and the United States Declaration of Independence were all less than 300 words.”

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This is not entirely accurate. Magna Carta has nearly 5,000 words, the Ten Commandments number more than 310 words, and the US Declaration of Independence has about 1,300 words, not including 56 signatures. But Shorten's message appeared clear:

"It should be a tick-and-flick plain English contract where you know you are covered for fire, storm damage, flood and so on," he added.

Should government fill the void?

The government is being backed by consumer advocacy groups, which are calling for a national inquiry into flood insurance. Coming up with a standard definition of just what constitutes a flood and promoting better policy disclosure before consumers sign the dotted line are their key demands.

“Disclosure is a problem,” says Christopher Zinn, media spokesperson for the consumer advocacy group Choice. “Insurance companies are very keen to tell you what is in their policies, but people are really interested in what is left out. There needs to be mandatory one-page fact sheets provided with policies which contain a simple and clear list of policy exclusions.”

Mr. Zinn says the government should consider setting up a national fund to cover natural disasters, similar to how New Zealand covers earthquake damage. Queensland-based members of the ruling Labor party have gone so far as to threaten the insurance industry with a rival public insurance plan should the upcoming talks fail to bear fruit.

Australia’s insurance industry concedes reform is needed. Robert Whelan, chief executive officer of the Insurance Council of Australia, said Thursday that it is time to settle upon a “common definition of a flood,” but he added that insurers should “retain the right to derogate and amend the definition” to take into account “unusual terms.”

The council, which represents many of the country's biggest insurers, lays much of the blame on consumers, saying they should have read their insurance policies more closely. It has also attacked the government’s flood tax, along with proposals to introduce a national disaster fund.

“The flood levy may have unintended consequences – creating a moral hazard and encouraging fewer people to take responsibility for their own risks through purchasing appropriate insurance products,” Mr. Whelan told reporters.

(Editor's Note: The original version of this story misidentified the location of Queensland.)

IN PICTURES: Australia floods


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