Torrent Of Criticism At Insurance Stance

Illawarra Mercury

Thursday August 14, 2008

By PAUL McINERNEY

INSURANCE companies hold a special place in the history of the August 1998 storms, but it is one they would rather keep quiet.

When the majority of companies turned their backs on a devastated and demoralised city with a blanket rejection of claims by policyholders, they were branded corporate pariahs.

In a passionate outpouring of anger and disgust, the community rallied to challenge a hard-line approach to policy fine print about what constituted a flood rather than a storm.

Even Prime Minister John Howard and Governor-General Sir William Deane left the insurance industry in no doubt as to how they felt about the callous stand when they visited the region after the floods.

People power ultimately won the day. The NRMA was the first to buckle and GIO followed.

With the big two companies agreeing to make good on the vast majority of claims, the smaller outfits slowly fell into line.

"It was a major victory for decency and fair play and I remember sipping champagne in celebration with one family after their claim came through," Maguire and McInerney solicitor Mark McDonald said.

Mr McDonald was one of a number of lawyers who became an integral part of the campaign against the insurance companies.

"The most astonishing thing that came out of that initial reaction was, for the first time, people found they were not insured for damage to their homes because of a major storm.

"The insurers were issuing blank denial to policyholders where they could say water came out of a creek," Mr McDonald said.

"The crazy part about that was I, like everyone else the next morning, knew that vast sheets of water had flown across the surface of the ground then gone into watercourses, then come out of watercourses.

"The arguments being put forward by the insurance companies were really silly but it wasn't until there was a common uprising by the community that the big insurers had a change of heart.

"I'll never forget those community marches on the Sydney offices of NRMA and QBE, they were really inspiring," he added.

Wollongong Legal Aid solicitor Michael Sergent said his most vivid memory of the catastrophe was the first legal advice he gave to a young couple with their seven-year-old child.

"The child was rescued by his father as stormwaters reached the ceiling of his bedroom," Mr Sergent said.

"The block of units in which they lived had been built over a creek.

"Within 48 hours of the major downpour the legal alarm bells were ringing right across the region and we threw open our doors for free legal advice.

"We not only provided legal advice but emotional support.

"We arranged for more lawyers to come down from Sydney to assist," he said.

Mr Sergent praised media organisations, especially the Illawarra Mercury, for their support during the campaign.

"Without a media strategy the fight would have been much more difficult and protracted," he noted.

The most important lesson to be learned from the 1998 storms was for people with home and contents insurance policies to check to make sure exactly what was covered.

Mr Sergent also had a warning for present owners: "There is a perception I pick up from time to time that most people think that because of the great 1998 campaign they are now covered for flood damage.

"This is not the case and a number of insurers still do not provide flood cover, or cover for other natural disasters such as land subsidence, storm surges and tsunamis," he said.

Insurance Council of Australia communications general manager Paul Giles said that since the Wollongong storms, the industry's responsiveness to disasters has improved "in leaps and bounds".

He said that in the past two years, the council had focused its energies on the Flood Project - a move to find consensus and greater clarity through standard definitions of what comprise storms and floods.

"Finding a national definition has been a fundamental problem for generations," Mr Giles said.

The definitions will not be binding or any insurance company, but are nonetheless a step forward for homeowners.

A second arm of the Flood Project is the compilation of national data as a mapping tool to identify areas at risk of inundation.

Armed with this type of information, insurers would be able to assess the potential risks of flooding and issue policies that reflected that risk, he added.

© 2008 Illawarra Mercury

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