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Old Jan 22nd 2011, 2:05 am   #1
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Default Floods - and insurance

Nothing I am about to say is intended to deny the misery of those who have lost everything in the floods.

However..........

When I see endless soundbites from Ms Gillard going on about the insurance companies and their implied lack of sympathy I do wonder.

Floods are a fact of life in some parts of the world, and this is very true of many built-up areas in Australia, where they occur with irregular regularity every few years. If you choose to build in these areas, and if you are allowed to, it is of no direct concern of the insurance companies. If they will insure you against flood then fine: they do their risk analysis and will charge a premium commensurate.

For Ms Gillard to suggest they *must* include flood cover is just ignoring what the purpose of insurance is. Say a house and contents are worth, just for the sake of argument, $1m plus land, and it's built on a patch that is inundated every ten years on average. This means the insurer is going to pay out $1m every decade. So he needs to set a premium of $100,000 pa plus costs - say $110,000 pa.

Realistic/ I think not.

It's the old story of wanting your cake and expecting to eat it as well. It's a grand idea, sitting by the pool at the river's edge but it does come with very substantial risks and, much as I am leery of insurers' get-out clauses, I wouldn't expect them to rush to insure you against a darn near certainty.
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Old Jan 22nd 2011, 3:58 am   #2
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Default Re: Floods - and insurance

Yup to all that, I chose more expensive insurance mostly for the comprehensive flood cover.

If someone is in a flood prone area and doesn't read the policy carefully that is their look out.
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Old Jan 22nd 2011, 4:39 am   #3
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Default Re: Floods - and insurance

Just copied this off Facebook FYI

Went to Fernvale again yesterday, and I must say I am totally disgusted with certain Insurance companies! X and X you need to relook at you position on the people out there. Not only are some not sending assessors they are saying rivers rising is not a flood so people are not covered. Even when they insured before buying they were not in a flood zone!

I deleted the names of the specific companies as I have no eveidence to back it up.
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Old Jan 22nd 2011, 4:48 am   #4
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Default Re: Floods - and insurance

That's exactly the problem: to most people a river rising IS a flood but it isn't in insurance terms. Look at it this way: rivers rise and fall all the time and flooding is a probability. Insurers don't normally insure probabilities - they can't, unless *all* policyholders pay the claims. So "floods" are when rain or a burst pipe causes the damage or, in the case of the valley floods, a torrent comes down the valley.
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Old Jan 22nd 2011, 5:23 am   #5
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Default Re: Floods - and insurance

I fully understand your point and agree with it, but a lot of these people believed they were insured because they were told as much by the companies themselves. Yes they should have read the fine print with the responsibility on them to understand it, but it should be in plain speak and not in terms a layman might not understand.
I also believe the people who lend the money should insist on the correct insurance cover just as it's a requirement to have personal insurance. A survey is done for that very reason and i think i'm right in saying a flood plane survey is required in those areas.
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Old Jan 22nd 2011, 5:29 am   #6
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Default Re: Floods - and insurance

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Originally Posted by Nige37 View Post
I also believe the people who lend the money should insist on the correct insurance cover just as it's a requirement to have personal insurance. A survey is done for that very reason and i think i'm right in saying a flood plane survey is required in those areas.
It's not practical tie it to lending - I think something like 1/3 of properties are owned outright.

Ultimately people have to be responsible for understanding what they are covered for...everyone knows there are differences when it comes to situations considered, 'Acts of God' - you simply have to check.

I'm not sticking up for insurance companies, I have a relative who has been denied a critical illness payout for the most far fetched and pedantic of reasons.
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Old Jan 22nd 2011, 5:35 am   #7
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Default Re: Floods - and insurance

I can't remember exactly what our policy says, but it covers all water apart from directly from the sea (that is Suncorp). I went with them because of their more comprehensive flood coverage.
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Old Jan 22nd 2011, 8:12 am   #8
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Default Re: Floods - and insurance

I am reading that banks are considering tying flood insurance to lending as they are being left with properties less than the loan value.

The impact on prices in affected areas will be significant.

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It's not practical tie it to lending - I think something like 1/3 of properties are owned outright.

Ultimately people have to be responsible for understanding what they are covered for...everyone knows there are differences when it comes to situations considered, 'Acts of God' - you simply have to check.

I'm not sticking up for insurance companies, I have a relative who has been denied a critical illness payout for the most far fetched and pedantic of reasons.
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Old Jan 22nd 2011, 8:19 am   #9
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Default Re: Floods - and insurance

This is where consumer protection and standard definitions should come into play. Rightly or wrongly people buy products that are wrong for them.

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Originally Posted by Wol View Post
That's exactly the problem: to most people a river rising IS a flood but it isn't in insurance terms. Look at it this way: rivers rise and fall all the time and flooding is a probability. Insurers don't normally insure probabilities - they can't, unless *all* policyholders pay the claims. So "floods" are when rain or a burst pipe causes the damage or, in the case of the valley floods, a torrent comes down the valley.
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Old Jan 22nd 2011, 8:28 am   #10
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Default Re: Floods - and insurance

Quote:
Originally Posted by KatieStar View Post
I can't remember exactly what our policy says, but it covers all water apart from directly from the sea (that is Suncorp). I went with them because of their more comprehensive flood coverage.
And I'll they will get a bit more new business in the coming year ... when I reviewed the other policies 'rising water' was a common way of describing the exclusion sometimes mentioning rivers and streams, if that isn't plain I do know how much more explicit you can be.
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Old Jan 22nd 2011, 8:41 am   #11
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Default Re: Floods - and insurance

I specifically reinsured with Suncorp 6 months ago rather than AAMI because they covered flood despite AAMI being cheaper. AAMI were very upfront about the differences in policy when asked pointing out both disadvantage and benefit.

Frankly, all Ms Gillard's and everyone else's attitudes toward the "evil" insurer will achieve, will be a refusal by the insurer to cover you at all should you live in a prescribed flood plain area of risk.

Insurance companies make a profit by taking the long term view on risk as a commercial business and are not a nationalised social benefit system, nor should they be. It allows competitiveness in the marketplace for different products.

Regardless if all the policy holders were covered for flood, with 25% of Australians not having insurance AT ALL, I wonder if they would expect the Federal government and my tax paying funds to pay for them.
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Old Jan 22nd 2011, 8:52 am   #12
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Default Re: Floods - and insurance

The only change I think they should make is to be VERY clear about the two types of flood risks and that the insured needs to consider these.

Where most of us at some point in our lives work it out and then check our policies every time afterwards to ensure we have the appropriate cover there is always the young, the less able, the less literate, the newcomers etc who could do with it being more clear that this is something they should consider.

I know many policies will clearly set it out but some you have to dig and know it is a distinction you should be checking for.

Unfortunately it is too late for the uninsured of this flood and they will just wear the losses and learn the lesson the hardest way possible. Was helping someone the other day who has taken a $500,000 hit... admittedly he probably couldn't have covered flood on his insurance in any case
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Old Jan 22nd 2011, 11:15 am   #13
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Default Re: Floods - and insurance

Maybe it was AAMI I got a quote from too. They were upfront that it had to be water falling on the roof to be covered, rising water wasn't. Picking insurance can be confusing. We have our car insurance with Suncorp too. I just added that on the policy. I haven't read the fine print of that carefully stored away document :-P Though I should do, as it is up for renewal.
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Old Jan 23rd 2011, 1:08 am   #14
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Default Re: Floods - and insurance

I think it is appropriate at this time that people check their bush fire cover, as well as flood. I don't think some people, in urban areas, are aware that they are not covered automatically if they are in an area that the insurer considers to be at risk. One of my sons is in one such area and pays the higher premium for cover.
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Old Jan 23rd 2011, 1:26 am   #15
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Default Re: Floods - and insurance

Quite right. Bush fires attack most houses with embers which blow a long way from the bush as Canberra residents found to their cost.
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I think it is appropriate at this time that people check their bush fire cover, as well as flood. I don't think some people, in urban areas, are aware that they are not covered automatically if they are in an area that the insurer considers to be at risk. One of my sons is in one such area and pays the higher premium for cover.
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