Legal groups say the long-awaited release of a proposed common flood definition will finally give consumers a clear understanding of what they are covered for.

Assistant Treasurer Bill Shorten released the wording at a community meeting in Ipswich last week, saying insurance companies must meet their customers halfway and that a single standard definition for flood is the best way forward.

He says the definition drawn up by Federal Treasury, the Insurance Council of Australia and consumer representatives is presented in language everyone can easily understand. It says:

“Flood means the covering of normally dry land by water that has escaped or been released from the normal confines of (a) any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or (b) any reservoir, canal or dam.”

Mr Shorten says stormwater run-off, which is typically covered in home and contents policies will remain the same.

“In the future, if the term ‘flood’ is standardised across insurance policies and defined in plain English terms, it will be more easily understood, so consumers aren’t surprised when they try to make a claim,” he said.

“Under this proposal, the term ‘flood’ can only appear in an insurance policy if it covers the standard meaning of the term,” Mr Shorten said.

The draft definition, which will now be open for consultation until May 13, has received a cautiously optimistic reception from various interest groups and legal experts.

Barry Nilsson Lawyers partner Robert Samut says the decision to differentiate between riverine flooding and stormwater or flash flooding is sensible.

“There’s no doubt that domestic policyholders are often genuinely confused about the difference between the two,” he told insuranceNEWS.com.au.

But Mr Samut says consumers should also understand that the definition doesn’t impose any obligation on insurers to automatically cover flood.

Consumer action group the Fair Go in Insurance Coalition says a clear and universal flood definition is crucial, while Insurance Law Service Principal Solicitor Katherine Lane says too many policyholders affected by the recent floods found out too late they weren’t covered.

“We’ve now got a ridiculous situation where many of those same policyholders, months down the track, are still waiting to find out if their claims have been accepted or rejected,” she said.