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The ongoing floods in Queensland and NSW has led to an influx in insurance claims, which legal experts say highlights the need for standardised definitions and increased Government support.

As of March 2022, Insurance Council Australia (ICA) reported 168 thousand insurance claims estimated to be worth $2.32 billion.

After suffering property damage from the floods, many Australians are now facing further hardship trying to claim insurance due to the fine print in their policies. The Financial Rights Legal Centre (FRLC) has urged the Australian Government to standardise insurance definitions, particularly terms such as storm, fire, wear and tear and malicious damage.

Alexandra Kelly, Director of casework at the FRLC said “At claims time, policyholders are too often surprised to find they are not in fact covered because the fine print in insurance policies excludes damage from wind, or hail or even rainwater runoff.”

“This is bad news for a large number of policyholders in Queensland and NSW who have inadvertently opted out of ‘rainwater runoff’ because they opted out of ‘flood’ cover,” Kelly said.

“A lack of consistency in definitions and use of key terms in general insurance hinders the ability of consumers to compare insurance products..

“The Australian Government must act to ensure the policies and practices of insurers do not undermine the objectives of ‘open insurance’.”

A recent FRLC report ‘Standardising General Insurance Definitions’, found 65 per cent of the insurers they assessed defined flood and storm as separate events while the rest grouped them together. Similarly, some insurers grouped wind, rain, hail, and cyclone within the definition of storm, but others did not. Many insurance policies also varied over whether soil damage, retaining walls, bridges, driveways and paths would be covered.

In the recent Federal Budget, the Australian Government committed $2.5 million over two years towards the FRLC’s Insurance Law Service. CEO of the FRLC, Karen Cox, said the funding was vital due to increased demand from consumers requiring legal assistance in insurance matters. Since 2007, the demand for the Insurance Law Service has increased by more than 900 per cent.

“The Insurance Law Service assists thousands of Australians to understand complicated insurance products, navigate claims and resolve disputes often during times of great distress,” Cox said.

“It is vital that the work of the Insurance Law Service continues, and the skills and experience of its specialist solicitors is not lost.

“Insurance plays an important role in supporting Australians in the face of everyday risks and increasing catastrophic weather events.”

A survey undertaken by the ICA revealed significant levels of underinsurance in effected areas. Roughly 37 per cent of respondents said they would not have enough insurance to rebuild.

CEO of the ICA, Andrew Hall, welcomed the increased funding but said more needed to be done.

“There are dozens of other communities in Australia that remain exposed to perils like cyclones and require similar assistance to uplift their mitigation,” said Hall.

“It is incumbent upon the Government to not only assist with recovery but announce further investments to better protect communities from the impacts of extreme weather.”