The federal government’s flood inquiry opened on January 31, and the last of 23 hearings took place on July 30.

It has been a mammoth undertaking, with 81 submissions and 600 survey responses. The House of Representatives Standing Committee on Economics has heard from consumer groups, regulators, insurers and affected communities.

Now, as we wait for the committee to report its findings on October 18, it’s worth looking back at what MPs have heard, and what they might do about it. 

Terms of reference 

The inquiry into “the response of the insurance industry to major flood events across Australia in 2022” was announced in July last year.

“Given the increasing frequency of natural disasters, it is critical that the insurance industry remains robust to withstand these challenges, and that policyholders can be confident that they will be properly supported in future claims regardless of their insurer,” committee chairman Daniel Mulino said.

The terms of reference incorporated the catastrophe that struck NSW and Queensland in February and March 2022, and led to $6.3 billion in claims, but also other flood events that year. 

The committee was tasked with investigating the experiences of policyholders, different types of insurance contracts, claims, communication and dispute resolution.

“The inquiry shall also have regard to insurer preparedness for future flood events,” the terms of reference state.

While the Insurance Council of Australia welcomed the inquiry, some industry insiders feared it could become a “witch hunt”.

First hearings

The hearings began on January 31 this year, and criticism of insurers was immediate and brutal.

Consumer advocates called on the industry to “clean up” claims handling, and there was an allegation of insurer staff discussing their bonuses in front of tearful claimants.

“Vindictive” insurers were accused of lying to customers and pushing them into accepting low-ball cash settlements.

ICA CEO Andrew Hall was put through the ringer, as independent MP Andrew Gee, who represents flooded constituents in Eugowra and other NSW communities, asked him to admit he was “embarrassed and ashamed”. Mr Hall would not say those words - but he did say he wasn't happy to hear some of the evidence, and that the industry was "constantly striving to do better".

Insurers lined up to issue apologies and insist lessons had been learnt and action was being taken.

The second phase

Despite consumer advocates and MPs having done a thorough job of summing up concerns, the committee began a tour to hear directly from flood-affected communities.

Hearings were held in Caboolture, Logan, Lismore, Maribyrnong, Rochester, Heathcote, Molong, Eugowra, Richmond, Parramatta, Devonport, Cairns and Townsville.

“We are entering the critical second phase of this inquiry, where we want to hear first-hand about the floods’ impact on communities, and the experiences of local residents and businesses going through the claims process with their insurers,” Dr Mulino said.

Every community had insureds lining up to tell the committee how awful their insurer had been – with remarkably similar tales of woe emerging at each location.

The impact on individuals’ financial, physical and mental health became clear as people told their often harrowing personal stories.

What did we learn, and where to next?

In terms of the broad issues with claims handling and communication, a great deal of what was aired during the hearings was already known.

The industry had already commissioned its own review of insurers’ handling of the floods – and apologised for shortcomings that were found.

The scale of the catastrophes alongside covid-induced workforce and supply chain issues created a perfect storm of challenges that insurers were not prepared for.

What the hearings did make clear is the level of community anger towards insurers, and the lack of faith in the industry from consumer advocates. The reputational damage should not be underestimated.

The inquiry got stuck into some issues around standardised definitions and optional flood cover, but what the politicians will make of it remains to be seen.

Industry is expecting to see recommendations on expert reports (including hydrologists), standard definitions (perhaps including wear and tear), complaints handling, communication and the use of technology, and a standard approach to consumers dealing with damaged goods.

The issue of affordability is more complex. Some expect the inquiry to make a broad statement around an ambition for all homeowners to have access to affordable insurance, but to stop short of recommending how this is achieved.

Talk of a flood pool, to work alongside the government’s cyclone pool, persists, but much of the industry remains wary. Other options are being debated by insurers and the government.

And the inquiry is not operating in isolation – there’s already a Senate inquiry into the impact of climate risk on premiums, and the federal government has launched its Insurance Affordability and Natural Hazards Risk Reduction Taskforce. There's also the ongoing review of the General Insurance Code of Practice.

The flood inquiry report on October 18 will probably make fascinating reading – but it won’t be the end of the story.