Some flood-hit business owners have alleged they were misled by their brokers over the extent of their cover, the federal inquiry into insurers’ handling of record-breaking floods heard today.

Kellie Davis, a financial counsellor with community support group EACH, told a hearing in Rochester, Victoria, that many small businesses were in financial distress after realising they had no flood insurance following the October 2022 inundation.

“We see issues systemically across my caseload, issues where people were led to believe ... that they were covered for flood and that’s not been the case, so they’ve discovered three or four days post-event that they were not covered ... where they were riding on that security,” Ms Davis said.

But she said clients are reluctant to take action against their brokers.

“We are in a small community here and the brokers [are] often known personally to the business owners so ... clients are very reluctant to make a claim against the broker where there may be some alleged misrepresentation, or the broker has not adequately met the needs of the client.

“Clients are concerned ... they expressed that they don’t want to upset someone that they know.”

The inquiry heard from other community groups today.

“We have seen the many faces of insurance,” Rochester Community House Manager Amanda Logie said. “We have heard all of the stories. We have heard the good, the bad, the ugly and everything in between.

“Some of the examples that we have seen over the past 18 months have been delays in payments to clients, underpayment of cash settlement amounts, lack of details within scope of works.

“We’ve had residents bring in scope of works and entire rooms have been missed.”

Ms Logie said poor communication was a clear problem. “In some cases, it’s not necessarily between the insurers and clients. It’s between the insurers and the builder and then the client, so the communication is quite poor,” she said.

Rochester Flood Recovery Committee Chair Leigh Wilson said he accepts that insurers need to be “viable”.

“They are responsible at the end of the day to pay dividends to their shareholders, and they need to maintain profitability,” he said.

“But the other side of it is they sell a product, and they need to be able to deliver that product in a meaningful way. What we have experienced here is issues on steroids.”

He said the industry’s response has been underwhelming.

“The moment you need to make an enquiry, the moment you need to find out more information, the moment you need to ask: when is someone coming along? – that may take two weeks or a month to get an answer,” Mr Wilson said.

“But if you talk to your insurer about a payout, overwhelmingly you can get a payout figure within 24 to 48 hours.

"What is the aim of the insurance company with that type of methodology? What game are they playing?”