Federal Treasury will release a discussion paper on key facts sheets that consumers will receive with their insurance policy under the Insurance Contracts Amendment Bill.

The House of Representatives economics committee last week tabled its report following consultations on the bill, which provides the framework for the introduction of a standard flood definition and key facts sheets.

The report contains a draft key facts sheet, a one-page document that summarises what is and is not covered by the insurance policy.

Industry groups have raised concerns that consumers will rely on the key facts sheet rather than read their product disclosure document, saying an insurance policy is too complex to summarise on one page.

They also contend that as the bill reads now, consumers will not get insurance until the key facts sheet has been received and this will disadvantage people who need insurance urgently.

The Government wants consumers to use the key facts sheet to make a decision on insurance, but the proposed legislation means a householder ringing an insurer for a quote will have to be provided with a key facts sheet and might not get insurance until they have seen it.

The Insurance Council of Australia (ICA) says this could disadvantage consumers, such as someone buying a house who wants to get it insured immediately.

The report says Treasury will issue a discussion paper on the key facts sheet and do consumer testing.

The ICA has also raised concerns that insurers will not be able to apply standard flood exclusions, such as for high-risk property like jetties or where a house does not comply with building regulations.

Treasury says this is not the intent of the bill and it will clarify it in the explanatory memorandum.

Both ICA and the National Insurance Brokers Association say the standard flood definition could result in insurers covering only storm damage finding they are expected to provide flood cover, which will lead to them withdrawing storm cover.

The standard flood definition includes canals, and there is concern that stormwater courses might be considered to be canals. Treasury will consult further.

The regulations will take two years to effect. Consumers groups say this is too long, while ICA says it is too short given the 12-month timeline of insurance contracts.

While the committee recommended the bill be passed, Liberal members criticised the lack of clarity on responses to issues raised by the industry.

The committee has only considered the standard flood definition and key facts sheet, not whether flood cover should be compulsory or other recommendations from the Natural Disaster Insurance Review.