Home / Local / Flood definition becomes law
18 June 2012
The standard definition of flood is now law, after the Federal Government this morning enacted the regulations to give effect to the definition.
Financial Services Minister Bill Shorten says the regulations provide for a two-year transition period, which “will provide insurers with a sufficient lead time to update the content of product disclosure statements, retrain staff and implement any necessary system changes”.
The standard definition was finalised last November and has since been awaiting ministerial approval. It applies to home building and contents, small business and strata title insurance contracts across Australia.
Mr Shorten says under the regulations the word “flood” in an insurance contract will mean:
“The covering of normally dry land by water that has escaped or been released from the normal confines of: any lake, or any river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal or dam”.
He says the standard definition makes it easier for people to know what they are covered for, and what is not covered.
“A flood is a flood,” he said. “Never again do Australians want to see a situation – as we saw during the Queensland floods of 2011 – where neighbours hit by the same flood get different levels of cover because of technical definitions in an insurance contract.”
Mr Shorten says the Government recognises that many insurers have already adopted the standard definition. He urged all insurers to now do the same.
Insurance Council of Australia CEO Rob Whelan welcomed the move, saying this afternoon that the standard definition “has long been a goal of the general insurance industry” and will give property owners and insurers greater clarity and piece of mind.
“Though the standard definition is welcome, it is one part of a complex issue,” he said. “Insurance can only help communities recover from the impact of floods. Governments are responsible for protecting at-risk communities in the first place.
“Urgent investments in permanent, well-designed physical mitigation measures – such as levees, barrages, floodgates and improved drainage – are still required.”