Insurance on Flood and other Water Perils
By Dr Allan Manning
Copyright LMI Group 2011
Nothing dominated the media in the first 6 weeks of 2011 more than the storms and flooding that has affected much of Australia.
The Insurance industry is expected to pay out close to $3 billion in claims from these losses over and above all the other regular day to day level of claims lodged. This of course is great comfort to the over 100,000 claimants and of equal benefit to the economy.
It is often an overlooked fact just how much protection the insurance industry provides to home and business owners and to the Australian economy in general. In the year ended 30 June 2010, over $16.5 billion, was paid out in claims by insurers. That is the equivalent of $2.05 to every man woman and child in the country every day of the year.
This has an enormous spin off effect to builders, panel beaters, retailers of all types, professionals and on the list goes.
Despite this great benefit, insurance is not considered important to most until a claim arises. Till then it is just an expense that should be minimised with no thought of the implications of buying on price until it is often too late.
The media, in their usual sensationalist style, have criticised the insurance industry for hiding behind small print and leaving their customers hanging. Other than perhaps driving up viewer ratings, I am not sure that this does any good for anyone, and in fact may have two negative consequences. Firstly, it may encourage people not to take out insurance believing it will not respond anyway, and secondly, de-motivate the thousands of claims officers, loss adjusters and assessors who are working extraordinarily long hours in very difficult conditions to meet the needs of the insuring public.
It must be remembered that these same claims staff have hardly drawn breath since the Victorian Bush fires from 2 years ago. This was followed by 100,000+ claims from the Melbourne hail storm followed 6 weeks later by another 100,000 claims on the other side of the country arising from the hail storm in Perth. A billion dollars or more was paid out by insurers following each of these events.
Much has been made by some in the media about the fact that flood is not covered by some policies. This is quite true.
However, even after the massive floods of 1974 in Brisbane there has been a limited demand for the cover – until of course now, when it is far too late after the person’s home or business has been flooded.
What occurs then, as is occurring now, is that during a time of great trauma, a home or business owner, who in the vast majority of cases have never read their policy, has expectations of protection that are at odds with the coverage afforded by their policy.To say that the policy hides behind small print or hidden exclusions is also simply not true. Policies make it quite clear, often in the first few pages, and or in large print, and/or in many places, that flood is not an insured peril.
There were at least 203 different home and contents policies that were in force at the time of the Queensland floods.
Flood is not typically a standard cover across the entire insurance industry. Some insurers do provide it as standard, others provide the cover but reserve the right not to grant cover if the risk is outside their underwriting guidelines. Others offer the cover as an optional extra cover while some are not prepared to insure the risk at all.
As already mentioned, it is a regrettable fact that the vast majority of people do not take the time to read their insurance policy. The same could be said for their mortgage documents, hire purchase agreements, credit card contracts, lease agreement or dare I say it the instructions on how to assemble a child’s toy.
Why this is so is the subject of a paper in its own right. The point is that if you do not take the time to understand life’s risks and take out reasonable protection to cover yourself, it is not, all other things being equal, an insurance companies fault, nor the governments, nor anyone else’s. If a business or home owner is not sure, then they can engage the services of a general insurance adviser at little or no cost who will identify their needs and provide advice on what covers are available and what is best for them. Such experts have access to Policy Comparison and other research tools.
For expert advice, contact Lords Insurance Services on 4033 1066 for all your insurance needs.