Big Insurance Divide

Newcastle Herald

Thursday May 8, 2008

By MARTIN DINNEEN

THE Insurance Council of Australia has moved to clarify the definition of "inland flood" in home and contents insurance policies but critics have warned this may result in less coverage.

The move may end the confusion many Hunter policyholders experienced concerning their cover after the June long weekend floods but it may disadvantage consumers in the long run.

The council lodged an application with the Australian Competition and Consumer Commission under the Trade Practices Act in March for a common definition of inland flood to be adopted by its members.

The council's submission said variable definitions for common words, particularly flood, and technical meanings for commonly used words, such as watercourse, were not readily understood by consumers and often came to the forefront when claims were made.

Insurance Brokers Association of Australia consultant John Hanks applauded the push for a uniform definition of the term and clarity for consumers but warned against broad definitions in insurance contracts.

"The problem arises when a broad definition is used as an exclusion, as it often is, then it may exclude what is covered today," Mr Hanks said.

"Wide exclusion means restricted coverage."

A Choice magazine report showed discrepancies among insurers concerning causes of water inundation.

The report has found that damage caused by rainwater run-off is covered by almost all policies reviewed yet flash flooding, in which a drain, river or creek overflows, is covered only by two-thirds of insurers.

A definition of flood

Editorial Page 8

INLAND FLOOD

? Water that overflows or escapes from a naturally occurring or man-made inland water course or a water pool, whether it is in its original state or has been modified.

? Water released from a dam whether it be accidentally released or intentionally released to control, mitigate, regulate, or otherwise respond to excess water.

? Water that cannot drain or run off as a result of water that is overflowing or escaping from an inland watercourse or water pool, preventing the escape of water.

© 2008 Newcastle Herald

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