The Australian Competition and Consumer Commission (ACCC) says it will approve the Insurance Council of Australia’s (ICA’s) common industry flood definition, but has attached some stringent conditions.

In a draft determination released last week, the ACCC said it will conditionally authorise ICA’s definition of inland flooding for two years.

ACCC Chairman Graeme Samuel says the ICA proposal should improve consumer awareness about flood insurance, which has become “a critical issue for Australian consumers in recent years, with a number of reports identifying unsatisfactory levels of consumer confusion”.

Flood cover is typically excluded from personal lines, though recently most insurers have paid large-scale flood claims under storm provisions.

“The proposal does not seek to address consumer concerns about the availability, adequacy and extent of flood cover,” it said.

The definition is restricted to inland flooding caused by the release of water from a watercourse, waterpool, or dam.

The ACCC document imposes four conditions on insurers to ensure the ICA proposal delivers on its aims.

ICA will be required to carry out a comprehensive consumer education campaign and will have to report these activities to the ACCC every two years.

It will have to keep track of the number of ICA members which adopt the definition, and the quantity of policies sold that contain the wording.

Insurers will also be required to clearly disclose the definition to clients.

Finally, ICA members using the common definition will be prevented from modifying the wording.

The conditions follow earlier concerns that the definition may hand insurers a template to exclude cover or increase premiums.

The National Insurance Brokers Association (NIBA) and the Australian Securities and Investments Commission (ASIC) made earlier submissions to the ACCC to this effect.

Industry spokesmen were reluctant to comment on Friday, while ICA was unable to respond in time for publication. Obviously the insurers won’t be entirely happy with the ACCC’s proposed controls.

InsuranceNEWS.com.au understands policyholder advocates support the ACCC’s position.

The ACCC will take further submissions until July 24, prior to its final decision which is expected by early September.