A lack of insurance for partly damaged but structurally sound homes is one of the biggest problems affecting people recovering from floods and a new kind of cover should be developed, an action group says. 

Insurers deem a home unliveable when internal wall cladding has been removed, a kitchen taken out and all floor covering ripped up, meaning normal property cover isn’t available, the Northern Rivers Flood Action Group has told a federal inquiry into the 2022 floods. 

But cover is still needed, and people can become accidentally uninsured for future damaging events such as storms and fires. 

“Following the flood, hundreds of people have rushed to pay their insurance when they received their premium renewals thinking this would automatically lock them into continuation of their policy,” the group says in a submission. 

Policy disclosure obligations requiring people to notify insurers of changes to their property are often not well understood and people do not realise cover would be declined due to the state of their homes. 

The submission says builders’ construction insurance is not possible in the circumstances, as cleanout operations would be regarded as “commencement of works” and these policies must be in place before work starts. Public liability is also unavailable, the group says. 

It proposes a new type of basic policy that offers public liability and fire, storm and tempest cover for a structure in its “unliveable” state.  

“Invite the insurance company to come and take photos to their heart’s content and keep on file,” it says. 

The insured could then notify the insurer when the house repair is complete and request a further inspection before the policy is converted to normal building, public risk and contents cover. 

The group notes that despite the unliveable designation, people continue to occupy such buildings. 

The submission says clarity is also needed around when an insured must continue to pay premiums if a claim has been lodged yet not settled or finalised and no repairs have been carried out under the insurer’s oversight. 

“Is it fair to ask the insured to continue to pay premiums considering the contract is not satisfied by the insurance company?” it says. 

The submission was lodged to provide additional details after the group appeared before the parliamentary committee inquiry in Lismore last month.

From Insurance News magazine: After rolling catastrophes and amid intense scrutiny from authorities, how can insurers get it right next time disaster strikes?