NIBA President David Duffield (pictured below) has responded after Queensland Premier Anna Bligh called for tough new measures to hold the insurance industry to account as the second round of the Queensland Floods Inquiry in Brisbane commenced in late September.
In a statement outlining the State Government's response to the federal parliamentary inquiry into the insurance industry, Ms Bligh revealed that she wants insurance companies to be forced to pay their clients in full if they can't handle their claims in a reasonable time period.
The five-point proposal (printed below in full), which would require federal legislation, also suggests a "naming and shaming" policy for insurance companies who repeatedly or seriously breach the insurance code of practice and the adoption of a clear, standard definition of flood.
"What's clear from the worst disasters in Queensland's history is that the response of the insurance industry has not been good enough and the industry must do better," the statement read. "Too many people have had to wait too long."
Ms Bligh's comments attracted a robust response from NIBA.
"In the space of barely a month, the insurance industry was inundated with over 185,000 claims in respect of the Queensland and Victorian floods, Cyclone Yasi and the severe storms in Victoria," said NIBA President David Duffield. "Clearly the claims handling resources of the insurance companies and loss adjusters were stretched beyond their limits.
"Additional resources were sourced from overseas offices to assist with the processing of claims. The insurers' claims response was often hindered by a general inability to assess damaged properties and a shortage of both materials and skilled labor to assist with the repair efforts or even to provide quotes for repairs.
"Of the almost 130,000 claims relating to the Queensland floods and Cyclone Yasi, over 85,000 have had repairs completed or cash settlements made. Over $2 billion has been paid to date. "While the General Insurance Code of Practice stipulates a response time for claims, the code does not contemplate a disaster of the magnitude of the floods and storms experienced earlier this year. The vast majority of claims have been responded to in fewer than 28 days, which is an outstanding effort in these extraordinary circumstances.
"Insurers and insurance brokers will no doubt review their handling of claims arising out of the unprecedented series of natural disasters, and improvements will be made where appropriate. More importantly, governments must also seriously examine what can be done to mitigate the nature and extent of loss suffered by these communities. Prevention and mitigation is by far the most effective outcome for the people in these communities.
"In the meantime, credit must be given to the staff of insurers, brokers, loss assessors and adjusters, who all responded above and beyond the call of duty to provide the assistance needed by the community at these critical times."
There was a degree of skepticism at the timing of Ms Bligh's statement, following on as it did from the widespread criticism levelled at the Queensland Government's lack of infrastructure insurance – which was made public in September in The Senate’s Economics References Committee report The Asset Insurance Arrangements of Australian State Governments – and their latest failed attempts to secure reinsurance for its assets, in particular its road network.
"It is somewhat ironic that the Queensland Government is critical of the response of the insurance industry when Queensland was the only major State Government that did not purchase insurance protection to safeguard the State's assets against these types of natural disasters albeit this insurance protection was available to them," added Mr Duffield.
"As a result, the Australian taxpayers will all be contributing to the Queensland reconstruction through the flood tax levy in the 2011/12 period. It seems there is a need at all levels for greater education and appreciation of the important role of insurance."
The Queensland Government's suggested 5-point plan:
1. Strengthen the General Insurance Code of Practice
• The Code should specify a timeframe for decision-making and if overall assessment times are not improved the Commonwealth should consider legislating for "automatic claim approvals" where reasonable assessment timeframes are not met.
2. Ombudsman to 'name and shame'
• The Code could allow the Financial Ombudsman Service FOS to compel an insurer to advertise in a prescribed format in mainstream media (for example local and state newspapers) where there are repeated or serious breaches of the Code.
3. Benchmarks and penalties
• Insurers' annual reports should be amended to require publication of Internal Dispute Resolution and Financial Ombudsman Service performance to make a company's record clear to the public.
4. Adoption of a clear, standard definition of flood
• The Commonwealth should amend the Insurance Contracts Act 1984 to ensure that a common, easy to understand definition of 'flood' is in place and where there is any doubt the onus of proof should be on the insurer to demonstrate that the given event was not as a result of a flood.
5. Encouragement for insurance companies to use local labor where possible
• Insurers should offer the consumer a choice of suppliers, including a choice for builders, goods and services that can be sourced locally.
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