Another booby trap in the fine print
Sydney Morning Herald
Thursday February 3, 2011
CYCLONE Yasi is set to highlight another obscure clause buried in insurance policies that allows insurers to avoid paying claims in full when a natural disaster strikes.North Queensland residents were warned yesterday that sea levels could rise by as much as 1.6 metres when the cyclone hit the coast, causing dangerous waves and flooding some inland areas.But several big insurers exclude cover for this type of event, known as a storm surge, from their insurance against cyclones.After many flood victims in Queensland and Victoria found their "flood" policies excluded damage from rising rivers, fallout from Yasi could intensify the pressure on insurers to improve their coverage for natural disasters.The Assistant Treasurer, Bill Shorten, will meet bosses of the nation's biggest insurers in Sydney today, and a spokesman said cyclone cover would be raised.Mr Shorten has warned the industry to adopt a plain English definition of flood cover or face the threat of government regulation."While the government would prefer to see a private sector response, the insurance industry must be aware that the community and government now expect this issue to be resolved," his spokesman said. "Insurers need to come to the party ... or politics will fill the vacuum."Among the big insurers, AAMI's home insurance includes damage from a cyclone or tornado, but not storm surge, defined as "an increase in sea level that usually occurs with a severe storm or cyclone".NRMA covers violent wind and torrential rain, but not "the increase in sea level that usually happens when there is an intense storm or cyclone".Suncorp, one of the few to have adopted a standardised flood clause, provides cover for a storm surge.A spokesman for the Insurance Council of Australia, Paul Giles, said storm surge was not universally included because it was not needed by all customers. He said the industry lacked the data to calculate the impact of disasters such as storm surges or tsunamis.Consumer groups, however, say insurers are bogging down the debate in pedantic definitions rather than improving their products.The principal solicitor at the Insurance Law Service, Katherine Lane, said: "We are fighting about words. The consumer just wants to know that they're covered - they shouldn't need a meteorology degree."EXCLUSIVEAustralia's risk rating reassessed.BusinessDay, Page 3
© 2011 Sydney Morning Herald