The parliamentary inquiry into the record-breaking floods of two years ago has placed significant weight on achieving improvements through a code of practice overhaul, backed by greater oversight from the Australian Securities and Investments Commission.

The final report says the code should be enhanced as a priority, regulation should address areas such as standardised key terms, and ASIC’s data-gathering powers and its role in relation to the code should be strengthened so it can better monitor performance and carry out enforcement.

“More transparency is required in relation to the effectiveness of measures undertaken by insurers,” it says. “This report contains recommendations that set out new arrangements for the robust reporting of claims handling data to regulators and the publication of this data in order to hold insurers to account.”

The floods inquiry has made 86 recommendations, while the code of practice review initial report has made 101, with some crossover on the issues. The independent code review panel has said it will consider the parliamentary committee’s views in the next stage of its work.

The parliamentary inquiry backs the code review panel’s recommendation to make the code of practice enforceable by incorporating it into consumer contracts, while the industry has already agreed to seek ASIC approval for the document.

Code of practice strengthening is proposed in areas such as the identification of vulnerability and staff training, claims communication, cash settlements, and the use of expert reports and scopes of work, with the inquiry committee going further on requirements than the independent review in some areas.

The code review had proposed temporary accommodation benefits be extended until a property is fully repaired, up to a 12-month cap, with insurers required to contact customers at least three months before the benefits end and advise whether any extension is available.

The parliamentary committee recommends policies provide fully paid temporary accommodation until the insurer has closed the claim, unless the policyholder has unreasonably caused delays. It also says the funds should be separate and not part of the sum insured.

The report says the code should require insurers to adopt a more flexible approach on rebuilds and, in particular, not require a like-for-like replacement. Consumers should be able to swap out “size/scope for resilience and efficiency” in sum insured repairs and rebuilds.

On the issue of “reasonable maintenance”, it says a distinction should be made in the code between observable areas, such as roofs and gutters, and those that are not, such as housing stumps.

“Where maintenance is not observable and infrequent maintenance is required, there should be a presumption of coverage by insurers unless exceptional circumstances can be established,” it says.

Committee chairman Daniel Mulino told the Insurance Council of Australia conference last week that the extension of temporary accommodation and maintenance issues go to fairness in risk allocation.

“Someone described it to me that it’s almost like, with stumps, underwriting is happening after the fact,” he said.

“You pull up the floorboards and at times it feels like a lottery as to whether you’re covered.”

The inquiry report recommends the Insurance Contracts Act define all major forms of water damage, including rainfall run-off, storm surge, tidal surge and riverine flood, and key terms related to exclusions such as “wear and tear” and “lack of maintenance”.

It proposes government involvement in creating and funding an independent expert panel of hydrologists to provide second opinions for policyholders, and says the government should investigate mechanisms to require clearer communication on the basis for premium prices.

More than 20 recommendations go to issues related to mitigation and planning, with many supporting causes insurers have been campaigning about for years. These include resilience spending, abolishing state-based levies and taxes on insurance, and preventing building on floodplains.

The report notes the increasingly granular data that insurers generate and rely upon is undermining pooling, particularly at the higher-risk end of the market, and that along with climate change is potentially going to make more properties uninsurable.

“It is for this reason that the committee believes some form of government intervention will be required,” it says. “This is reflected in the fact governments intervene in flood markets in most advanced economies.”

While some interventions are better designed than others, the topic warrants urgent consideration, it says.

Recommendations include consideration of measures to improve the affordability of flood insurance for existing policyholders with high-risk properties, including “the appropriateness of a government-supported reinsurance arrangement”.

Any arrangement, such as a pool, should maintain risk signals and should aim to be phased out over time by being tied to mitigation and risk reduction. The report also suggests a regulatory mechanism to discourage banks from lending for developments where there is a high flood risk.

Dr Mulino says achieving better outcomes for consumers, particularly those who are vulnerable or at high risk, requires better claims management and better long-term settings for the nation.

“Only if we move forward on both fronts can we truly make progress for Australians at risk of future flood events,” he says.

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