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Connexus : Issue 41
T he future of flood insurance is set to return to the spotlight with the Productivity Commission expected to release its final report on the Barriers to Effective Climate Change. The question of whether to make flood cover a mandator y par t of home building and contents insurance was left unresolved in June when the federal government tabled its response to the recommendations of the House of Representatives Standing Committee investigation into the insurance industry during disaster events. The gover nment chose to defer the decision on compulsor y flood cover and the consumer ability to opt out of the cover until the Productivity Commission released its final report. Recent insurance moves In recent years major insurers have moved to make flood cover an automatic inclusion i n home building and contents insurance, with statistics showing that the propor tion of policies purchased with flood cover rose from three per cent in 2006 to 54 per cent in 2010, reaching 81 per cent by the end of 2011. Reece Williams, national personal lines manager, CGU, says it included flood cover as a standard benefit in its policies from Februar y this year, after customer surveys revealed two issues: they didn’t understand that they were not covered for flood and they didn’t understand the difference between cover for damage caused by flood and that caused by stor mwater. “Flood was something that historically we did not cover but stormwater we did. “ We believed that no matter what occurred, if you allowed a customer to take an opt out position there was still going to be a difference between what was a flood event and what was a stor mwater event.” However, flood cover is likely to continue to be a contentious issue, as some insurers choose to mitigate their risks by ‘red lining’ towns such as Emerald and Roma i n Queensland. Some insurers argue the government has so far failed to address the affordability implications of the trend towards automatic flood cover. Call for subsidy or opt-out Nicholas Scofield is general manager corporate affairs, Allianz Australia Insurance, one of the insurers giving people the ability to opt out of flood cover. He argues unless government either introduces some form of subsidy for people in medium and high-risk flood areas or they are able to opt out of automatic flood cover there is a danger that they will end up underinsured or uninsured. “If the government is not attracted at all to do something on the issue of high and dry The uncertainty surrounding flood cover is expected to be cleared up with the release of a productivity Commission report this month. By CHrIsTIne Long We believed that no matter what occurred, if you allowed a customer to take an opt out position there was still going to be a difference between what was a flood event and what was a stormwater event. CorbisNews 28 Connexus 28 Connexus Insurance