Insurers in Australia have been confronted with their share of controversy since the floods in Queensland and are now hard pressed to come up with answers.
The Minister of Employment and Economic Development, Andrew Fraser, states there is no obvious difference in damages caused by storm, flash flooding or riverine flooding, and that the clean-up after such damages is indistinguishable. He takes issue with the fact that many insurance policies can draft clear definitions regarding the damage.
The issue lies in many insurers refusing, or being unable, to pay for damages sustained during the floods. Citing that the risk of flooding cannot be attributed with a price, especially in Queensland where flooding is a significant risk, many insurers are refusing to offer comprehensive coverage. One company, however, Suncorp, does offer flood coverage as a standard policy.
Fraser concedes that those living in areas of high risk should pay premiums that reflect such but most of these flood prone areas are occupied by low income families that can’t afford it.
“The insurance companies, ostensibly opposed to government-backed schemes,” Fraser said, “might soon find new motivation to sort the flood definition issue.”
Fraser also warned the industry, that failure to reform their policies will result in an initiative to nationalize disaster insurance – a program that will cut huge swaths into insurers’ profit.
For damages that are not covered, plans have been put in place to help fund the rebuilding of Queensland by assigning a new tax levy. Backed by Treasurer Wayne Swan, the proposed $1.8 billion fund will come from being assessed $1 a week, with an estimated 6 out of 10 Australians being charged. As well as other government funded programs will step in to help families that were not insured.
All this and more, as residents brace for yet another storm system threatening the area. Forecasts predict the cyclone named, “Anthony”, to hit the northern coast later today along through January 31st. Coastal areas have been warned of the off shore system currently being monitored around Fiji.