Member for Blair Shayne Neumann with recommendations for changes to insurance laws and policies.
Member for Blair Shayne Neumann with recommendations for changes to insurance laws and policies. David Nielsen

Insurers facing walk of shame

INSURANCE companies that fail to deliver for their customers will be named, shamed and sanctioned as a result of flood inquiry recommendations tabled in Federal Parliament.

The government has six months to respond to the hard-hitting recommendations of the House of Representatives standing committee on social policy and legal affairs.

The committee's inquiry was in response to reports of many disaster victims encountering extreme difficulties with their insurance claims.

Committee member Shayne Neumann, the federal Member for Blair, said the recommendations would snap insurers into gear.

"There are far-reaching changes including empowering the Financial Ombudsman Service to name and shame offending insurance companies," he said.

"Other changes include making the voluntary code of practice mandatory for all insurance companies - which it wasn't in the past - and giving ASIC the power not just to license insurance companies, but to regulate, monitor and sanction insurance companies.

"We want to make sure there is a standard definition of flood and that disclosure statements are able to be understood.

"In the past the word 'flood' was sometimes used in insurance contracts to cover riverine flood, sometimes it meant storm water, sometimes it meant something akin to hail damage and sometimes a drain coming up. You just about need a doctorate in laws to understand it.

"Now the definition needs to be easily understood so people understand it... and it goes in every contract.

"We are making sure that insurance companies show utmost good faith when people make applications. They will have to handle the claims process properly. We are amending legislation that will allow consumers to sue them for breaches."

All insurers will have to carry a product that provides full replacement in the event of total loss and cover for damages resulting from flood.

"I want to also make clear that insurance companies can't opt out of their voluntary code of practice," Mr Neumann said.

"This is a warning for insurance companies. They will be named and shamed. The days when there is a general provision about breaches and no specificity...will be gone."

Mr Neumann said the recommendations, when enacted, would bring great benefits to Ipswich consumers.

"It will mean that we are equalising the power imbalance between the consumers of Ipswich and the West Moreton region who have been affected by the flood and the insurance companies.

"At the moment there is a power imbalance that allows insurance companies to opt out of their voluntary code of practice."

 

KEY POINTS

  • Shoddy insurers to be named and shamed
  • ASIC to be given powers to sanction
  • Flood to have standard definition
  • Disclosure statements must be in clear language

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