As is becoming the norm for financial services bills, the Federal Government has quietly introduced the flood cover amendments to the Insurance Contracts Act.  

Insurers will now have to use a standard flood definition on all home and contents policies as well as small business and strata contracts.

The proposed wording in the Insurance Contracts Amendment Bill 2011 defines flood as meaning “the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal or dam”.

Any contract that now includes flood cover will see the insurer having to pay any claims as the definition in the bill will apply.

Insurers will also have to “clearly inform” the client in writing about the extent of flood cover in the policy before the contract is completed.

In addition, they will have to provide a “key facts sheet” with every policy as well as the traditional product disclosure statement.

The facts sheet must be easy to read and have a consumer-friendly layout, “enabling consumers to access the key information in a simple and effective way”.

It must only be one page and explain what is not covered, details of the cooling-off period and an explanation of how it is to be used.

Insurers will not have to provide another facts sheet for a new policy if the client already has been issued with one or the consumer declines one.

But the new bill says the onus is on the insurer if there is a dispute and a facts sheet was not provided.

The Government has allowed a two-year implementation period for introducing facts sheets starting from the date when the bill gains royal assent.

No date has been set for this as the bill has been sent to the Senate Economics Committee for review.

It will be taking submissions on the proposed bill until January 13, with a report being handed down on February 8.