Definition of Flood now law

Flood definition becomes law

The standard definition was finalised last November and has since been awaiting ministerial approval. It applies to home building and contents, small business and strata title insurance contracts across Australia.

The word “flood” in an insurance contract will mean: “The covering of normally dry land by water that has escaped or been released from the normal confines of: any lake, or any river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal or dam”.

Financial Services Minister Bill Shorten says the regulations provide for a two-year transition period, which will give insurers a sufficient lead time to update the content of product disclosure statements, retrain staff and implement any necessary system changes.

He says the standard definition makes it easier for people to know what they are covered for, and what is not covered.

He said that A flood is a flood, and that “Never again do Australians want to see a situation – as we saw during the Queensland floods of 2011 – where neighbours hit by the same flood get different levels of cover because of technical differences in an insurance contract.”

Mr Shorten says the Government recognises that many insurers have already adopted the standard definition. He urged all insurers to now do the same.

While to some of us, the standard definition is welcome, but it is one part of a very complex issue.  The fact is Insurance is expected to help communities recover from the impact of floods.  Governments are responsible for protecting at-risk communities in the first place. This includes not allowing the building new housing estates in known flood prone areas. Better flood mapping so both insurers and government can appreciate the risk. Making sure drainage is adequate for significant rains and that they are maintained constantly.

There is significant retro work required for more flood prone areas that need urgent investment in permanent, well-designed physical mitigation measures, such as levees, barrages and floodgates along with community crisis plans.

Australia is a land of extremes and we seem to quickly forget how quickly we can flood after five years of drought, how quickly empty dams can fill within a few weeks, and the damage water can make if we do not adapt and learn to live with flood.

No standard definition of flood is going to prevent the losses and the subsequent increased premiums householders and business people will have to pay for these risks. No standard definition of flood is going to stop people opting out of insurance altogether because it is too expensive to insure.

And do not forget, that in Queensland, almost 20% of your insurance premium goes towards government taxes. Perhaps they can direct these Stamp Duties, Terrorism Levies and GST into more flood mitigation projects?