The Insurance Council of Australia says it will review the parliamentary flood inquiry report released today, while consumer groups and counsellors have called for the industry to accept the recommendations. 

ICA says it has already made progress towards many of the recommendations, including work on a potential standardised maintenance and wear and tear clause, and better identification and handling of vulnerable customers. 

“We look forward to continuing to collaborate with the government, opposition and other stakeholders on the report’s recommendations,” CEO Andrew Hall said. “Getting the balance right between good customer outcomes without putting further pressure on premiums will be key to successful implementation.” 

Financial Rights Legal Centre director of casework Alexandra Kelly says the report puts insurers on notice and provides a clear road map “to clean up their act” and improve claims handling. 

“Many of the recommendations are focused on the insurance sector improving its self-regulatory code of practice,” she said. 

“General insurers need to implement these recommended changes, and the changes recommended in the recent report of the independent review of the code, without delay. If they do not, the government should be prepared to step in and legislate the changes required.” 

Financial Counselling Australia says that of the 14 proposals it made in two submissions, almost all have been accepted either wholly or in part. 

“We are particularly pleased to read the recommendations concerning cash settlements, temporary accommodation and trauma-informed training for insurance company employees,” co-ordinator of disaster recovery Vicki Staff said.  

The Restoration Industry Association of Australasia says many of the recommendations, if adopted, will help householders return to their properties faster after a disaster. 

“Standardising terms relating to wear and tear and property maintenance, along with standardised scopes of work, will provide greater clarity for householders, restorers and insurers,” president Brodie West said.

“This will reduce the likelihood of disputes that could delay urgent restoration work, leading to damage that could be restored becoming worse over time.” 

The report, titled Flood Failure to Future Fairness, says its findings point to the need for “systemic changes to the way insurers operate during natural disasters and a significant strengthening of regulatory powers and oversight”. 

Committee chair Daniel Mulino says the title reflects “the collective failure by insurers to meet their obligations to policyholders” in 2022, and it is hoped the report’s 86 recommendations will deliver a fairer system. 

Recommendations cover areas within the responsibility of insurers, including use of expert reports, cash settlements, temporary accommodation and communications, and also address mitigation and the role of government. 

The report recommends ICA work with the Australian Securities and Investments Commission to develop guidelines around tighter oversight of building contractors, and says policyholders should receive a “comprehensible and standardised diagram or flowchart” with realistic time estimates for each step of the claims process. 

The inquiry committee recommends the code of practice should require an insurer to contact customers within five business days of it becoming aware of a material change in expected timings, and says insurers should provide access to real-time information about a claim’s progress, which could be through a mobile application or other platform.

Insurers should also provide fully paid temporary accommodation until a claim is closed, unless the policyholder has unreasonably caused a delay, it says. 

The report says ASIC should develop and define key consumer experience outcomes, and legislation should provide it with data-gathering powers so it can publish quarterly insurer and brand-level data on performance. 

Governments at all levels should ensure no new developments occur in high-risk areas, and federal mitigation spending of at least $200 million year should continue. 

The report also says the government should consider measures to improve the affordability of flood insurance for high-risk properties, including the “appropriateness of government-supported reinsurance arrangements”. 

“Any scheme involving public funding being devoted to a reinsurance pool or subsidies should be phased out over time in line with ongoing investment in community and household mitigation to reduce the underlying risk,” the report says.