01.Changes to code mean more claims count
Know your rights
Home and contents insurance customers who have been affected by the latest round of flooding events in Queensland and NSW should be better protected thanks to reforms put into play following the floods of summer 2011, but many insurers still have some wriggle room when it comes to defining flood.
In line with changes brought about by the National Disaster Insurance Review, insurers will have to define flood by July 2014 as “the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal, or dam”.
As our most recent home and contents market-wide review revealed, however, a number of insurers have already adopted this definition.
Many consumers may understand that storm runoff and riverine flood are different events and that storm runoff and the resulting flash flooding is not the same as a flood as defined above, but it’s also important to know that the Financial Ombudsman Service (FOS) has overturned a number of claims rejections where it was determined that storm runoff occurred before riverine flooding. FOS has also held insurers accountable for flood cover if the salesperson made it sound as though it was included, regardless of what the policy said.
While insurers won’t have to adhere to the common definition for flood until July next year, the fallout from the floods of summer 2011 brought about changes in the General Insurance Code of Practice that are currently in effect:
- A four-month deadline for accepting or rejecting a claim unless there are extenuating circumstances, including “extraordinary catastrophe or disaster as declared by the Insurance Council Board”;
- A 12-week deadline for reports by external experts, such as hydrology reports; the sharing of these reports with policyholders; and an explanation of how they affect claims decisions if requested;
- Enhanced employee training so that company staff can “carry out their claims handling tasks and functions competently and deal with customers professionally”, with a focus on understanding a policyholder’s particular circumstances; and
- A new “right to claim” says insurers “will not discourage you from lodging a claim, even if we are of the view that it is unlikely to be accepted”.
In addition, the industry has promised to release future Code Compliance Committee reports that describe significant breaches of the code by insurers.