In late 2011 the Australian Government commenced the process of
"improving the availability and transparency of flood
insurance". This process is well underway. We provide a
progress update on the package of measures being implemented by the
Insurance Contracts Act amendments pass the
The Insurance Contracts Amendments Bill 2012 passed the
Senate on 21 March 2012 and is awaiting Royal Assent.
The Bill contains the following key provisions:
A standard definition of "flood" for riverine
flooding will apply to a "prescribed contract" of
insurance. The regulations will provide the definition and identify
the prescribed contracts.
The standard definition will override any definition in the
Insurers must provide consumers with a one-page Key Facts Sheet
for home building and home contents insurance contracts (combined
and individual) in accordance with the regulations. This is not
limited to insurance contracts providing cover for flood.
Standard Flood Definition
An Exposure Draft of the Insurance Contracts Amendment
Regulations 2011, which provides for the standard flood
definition, was released for public consultation in 2011.
Submissions have closed and the draft regulations will be finalised
The key provisions in the Exposure Draft were as follows:
" The proposed definition of "flood"
"the covering of normally dry land by water that has
escaped or been released from the normal confines any of the
a lake (whether or not it has been altered or
a river (whether or not it has been altered or
a creek (whether or not it has been altered or
another natural watercourse (whether or not it has been
altered or modified);
" "Prescribed contracts" are defined as
home building and home contents (combined and individual policies),
small business, and strata title insurance policies.
The amendments to the Regulations will commence 2 years after
they have been made.
Key Facts Sheet
The aim of the Key Facts Sheet is to allow consumers to quickly
and easily check the basic terms of the insurance policy, including
the nature of cover and any key exclusions.
A discussion paper seeking public comment on the prescribed
contents of the Key Facts Sheet was released earlier this year and
the closing date for submissions is 23 March 2012.
Prototypes of the Key Facts Sheet will be consumer-tested before
the final content, format and structure are settled.
Availability and Transparency of Flood Insurance
The Government has issued a Consultation Paper - Reforming
Flood Insurance: A Proposal to Improve Availability and
This Consultation Paper relates to the Government's proposal
to require all insurers to offer flood cover in home and building
and home contents insurance policies, while allowing consumers to
"opt out" of flood cover. This proposal has arisen out of
the Final Report of the National Disaster Insurance Review and is a
contentious issue within the insurance industry.
Written submissions close 30 March 2012.
The Government's reform package is likely to lead to higher
compliance costs for the industry, re-pricing of policies and the
withdrawal of products. The industry can only make submissions as
appropriate and be prepared for the changes.
We will continue to monitor these statutory changes and provide
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Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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