Insurance policies must be understandable: Moylan
Posted on Tuesday, 28 February 2012
The Hon Judi Moylan MP says the current exemptions of insurers from unfair contract provisions are amongst the major concerns of the Social Policy and Legal Affairs Committee’s report into the operation of the insurance industry during disaster events.
Speaking at the launch of the report, In the Wake of Disasters, Mrs Moylan, Deputy Chair of the SPLA, said whilst these events placed unprecedented strain on the insurance industry, the overwhelming number of appalling experiences reported by claimants has exposed significant deficiencies in the way claims are handled and the regulatory framework overseeing the insurance industry.
“Of particular concern to the committee is the current, legislated exemption of insurers from unfair contract provisions which protect consumers in other types of contracts,” Mrs Moylan said.
“It is unfathomable that people faced with the loss of their homes and businesses only have piecemeal protection of their rights. The industry is self-regulated, and operates under a voluntary code of conduct, which the Australian Competition and Consumer Commission (ACCC) have no authority to enforce.
“Time and again we have seen that voluntary codes do not always work in the interest of consumers and small businesses,” Mrs Moylan added.
To ensure proper protection of consumer rights, not only must the legislative protections be strengthened, but the regulatory authorities must be resourced and empowered to do their job.
“For the benefit of both consumers and insurers, policies must also be understandable. Knowing exactly what is, and is not covered, in plain English, can make the claim process easier and prevent litigation, which is costly and distressing. Submissions to the Committee also stressed that the whole claims process needs to be reviewed to make it less traumatic.”
The succession of natural disasters across Australia over the last four years has taken a heavy toll in human life, destruction and heartache. In the Queensland floods alone, 35 people tragically lost their lives, two million people were living in declared disaster zones and 28,000 homes required re-building.
We have also seen floods in Victoria and New South Wales, as well as fires and hail in Western Australia. These catastrophes resulted in over 185,000 insurance claims between 2010-11 and $4.3 billion in damage.
Evidence to the Committee suggests that in some areas there are market failures and for some the cost of premiums has risen from 30 – 1000 per cent.
One of the important recommendations of the Committee is for the Government to convene a taskforce to examine the reasons for and solution to insurance market failures leading to high premiums.
As part of that work Mrs Moylan was of the opinion that both State and Federal governments need to examine the systemic problems such as ageing power infrastructure which is known to be the cause of catastrophic fires and planning decisions that allow building in known flood zones and areas susceptible to cyclones and flood surges.
Mrs Moylan expressed her gratitude to those who organised and attended the public hearings across Australia, including those in the Pearce town of Toodyay. More than 30 homes were destroyed when a bushfire ravaged parts of the Avon town in December 2009.