Over at New Matilda, Ben Eltham and Ian McAuley critically examine some of the controversies about insurance stimulated by the recent Queensland floods and cyclones, and analyse suggestions for industry reform.
Life, Culture and Politics from BrisVegas
Larvatus Prodeo is an Australian group blog which discusses politics, sociology, culture, life, religion and science from a left of centre perspective. more»
» SUBSCRIBE to LP updates.
Theft is still theft. Welching is still welching. Fraud against the public is still fraud against the public. Deceit with intent is still deceit with intent …. so why is this issue still a matter for discussion at all?
Do we have an earnest discussion every time a Police officer arrests a felon? Hardly.
It’s all a gamble. Either I bet I won’t get robbed or my home damaged or destroyed and don’t take insurance or I buy a policy and the insurance company bets I won’t get robbed or my home damaged or destroyed. But now it’s more like casino gambling and they’re the house. They’re going to do everything they can to limit their risk of paying out. They’re going to narrow the definitions as much as they can and rate severity and scale for ‘reasonable and customary’ charges by tradesmen they select as venders. If they do get hit with a claim, they run the risk of paying out more than I’ve paid in, even with deductibles and lifetime caps. Seems pretty fair, although I’d agree a common definition of ‘flood’ is more than reasonable.
Catastrophic damage from storms, floods, bushfires is not the same as a car accident. In the latter my risk is not my own. Others are very likely to be involved and may come off worse. If I drive, it seems entirely reasonable to me that I am required to have insurance. If my house is destroyed in a flood, that’s my risk alone, although my neighbour may bear the same risk. My home isn’t likely to flood his, however, when the rivers rise. But living further within the flood plain than someone down the road or in the next suburb means that if I buy insurance, my risk is higher, so the cost and the limitations to my coverage are likely to be greater. These are things I need to understand and to ensure are addressed satisfactorily.
I have done some work for insurance companies and in my experience the companies are keen to get your premiums [and superannuation contributions - today's version of life insurance] but when it comes to paying up time, most consumers realise that the pay out is insufficient to cover the risk insured for or premiums paid.
Suncorp and APIA cover riverine flood, RACV does not
I’m irritated in the extreme by my inability to get comprehensive insurance. My definition of which is a simple “list the things that are not covered, in plain English” type of policy. I want the list to be short, but I haven’t found a company that even has a list. The usual policy is full of weasel clauses and the sort of stuff that would get any other contract thrown out. Usually it’s “excluding acts not specified”, “as defined in materials not available to the customer” and “subject to such amendments as may be made from time to time and notified…” (20 pages later) “by means of an advertisement in the Woolhambara Duck Collectors Gazette”.
Otherwise what’s the point? I don’t want insurance just for predictable, affordable risks, I want it for the “bolt from the blue” stuff. Yes, including bits of satellite falling on my house, being unable to work due to being bitten by a rabid badger or a weird religion declaring my house a sacred site. I don’t care, pay up or prove that I did this to myself deliberately.
The region in which I live has experienced 3 major flood events in the space of two years. A landmark bridge has gone under 6 times in that same period of time. My old house is now in a street where all dwellings are uninsurable because storm water drainage is simply overwhelmed by the runoff from the mountainous surrounds.
Even comprehensive car insurance has more than doubled and in some cases tripled.
What is particularly interesting is that the premium suburbs are all coastal and already some of them are being threatened due to the shifting nature of foredunes (yes, they have built right on the foredunes!)as the sand is eroded and then redeposited. The artificial harbour acts as a sandtrap, preventing the natural northwards march of the sand, meaning that these northern suburbs tend to have erosion that outstrips deposition. Add only a small amount of sea level rise and tens of millions of dollars worth of real estate will simply disappear. Interesting times for the insurance industry.
SU’s comment @5 reminded me of listening to the Munich based re-insurer interviewed on Lateline Business (14 Feb) who said there had been a 30 fold increase in claims from Australia since the 1970′s.
My image of SU’s account is those boat-owners who somehow believed their craft were safe in the Hinchinbrook marina. The resulting pile up suggests to me that owners were either absent or complacent. If I was an insurer I would be asking the latter particularly why they didn’t think about getting the boat trailer into action.
Corporate insurance buyers have for many years demanded clarity and certainty from the insurance industry .Hence they have had a clear and concise definition of FLOOD written into their policies.
It is only the small business sector and homeowners who have been hung out to dry (no pun intended)with no clarity in the definition of flood and frequent obfuscation about whether there is any cover at all;the attempt by the Insurance Council of Australia to produce a “non-binding” (helloo!) definition in 2008 was destined to fail as it sought to define flood in a more restrictive way for homeowners than that applying to corporate insurance buyers.
The Insurance Contracts Act back in 1984 tried to resolve this “contract certainty” issue by introducing into the act regulations a model policy (which includes flood cover) and requiring that any insurer wishing to diminish the coverage offered by the model must clearly, in writing, advise the intending insured what coverage is not being offered. The insurance industry got around this requirement by merely dumping loads of paper on the prospective buyer and saying, in effect, ‘sort it out for yourself’.
We need to go back to the intent of the act and insist that an insurer clearly and expressly inform an intending insurance buyer of what is not being covered (it aint rocket science)and that they are, in effect, buying a sub-standard product (ie a policy that is not up to the standard of the statutory model).
If we find that the insurance industry genuinely cannot provide cost effective flood cover across the community then we need to consider establishing a community fund or ‘pool’ which in effect becomes a flood levy on all insurance policies.
Pablo @6 makes a good point. I have been told that several boat owners contacted the marina operators when the big blow started to ask if they should move their boats but were assured that all was secure. Locals may recall that the Cairns Marlin Marina was smashed by two cyclones before the Cairns Port Authority built an enclosing jetty-wall.
Since some insurance companies do offer effective flood cover I suspect its just that others are removing some aspects of flood cover so they can offer cheaper premiums. The product disclosure books I’ve found are generally pretty straightforward and easy to understand – but how many people take the time to read them?
Perhaps a way around this fairly common problem is to require that people explicitly ask for reduced flood coverage compared to the standard.
Billie on (3) and Everyone:
Wonder why our marvellous “investigative journalists” haven’t said a word yet about payouts that have been only a small fraction of the amount claimed. No, not bloated, exaggerated, “hit-the-jackpot” claims but genuine, verified – and rather modest – claims. Don’t expect any awkward questions or changes in the criminal law from the parliament’s herd of wimps either – turn on your radio and listen to them siding with the insurance firms wherever they can.
Chris (on 9);
I read mine. Those getting ripped off read theirs too: top-to-bottom, left-to-right, inside-out. Only an outright fool, a dullard or a sloth would fail to read the fineprint – even if it is written chock-a-block full of weasel-words and escape-clauses …. in simple Plain English, of course.
I demanded full cover – and paid through the nose for it too. And how much protection did I actually get from my policy when the force of Nature struck and after I had done everything reasonable to protect my possessions from damage? Well, ….
Graham Bell I am sorry to hear you are in that position, I wish you well.
Everyone:
Don’t know about you but almost everyone I know is going to either cancel or reduce their insurance – and – find alternatives to the current insurance system.
The thinking is that to continue paying into the present system is more akin to blind faith in a cult than to making prudent investments so as to cope with possible adversity.
Schemes where family and friends/neighbours club together and put the money they used to put into insurance premiums into collective rock-solid interest-bearing bank accounts instead might be alright …. “We might lose the house and go broke but at least we’ll have enough bond money for rental accommodation and a few weeks groceries and petrol” so the reasoning goes. BUT the thing that worries me is that the field is now wide open for every con-artist, shyster and crook to sell worthless “alternatives” to the current failed insurance system to angry and hurt former holders of convential insurance policies.
(Thanks, Bilie on 11; unfortunately, I’m definitely not alone).