Wivenhoe: The Insurance Issues

We think that when we take out insurance we can relax because if there is a disaster or a major issue then we are covered – that’s assuming that we have read the fine print of course. The people that were located in the Queensland floods areas experienced a phenomenal period of mayhem when firstly the rain and then the releases of water from the Wivenhoe dam inundated them, their homes and businesses in January 2011.

They evacuated to be safe and when they returned were faced with a cleanup that was devastating and to count their losses in many homes that had everything destroyed by the invading waters. Those that could afford to be insured tallied the cost and submitted claims to their insurance companies and then waited, waited and some still are waiting for assistance to rebuild and replace what they had lost.

As the water receded a big debate began about what caused the flooding and about who was covered and ultimately who was responsible overall for the damage and therefore the cleanup. Some insurance claims were paid in a timely manner which are not the ones we are concerned about it is the ones that were delayed or refused that have caused more grief for people that were already suffering which could have been avoided, which could have been very differently.

The Key Issues in the Wivenhoe Dam Insurance Claims

There are three main types of flood insurance that can be purchased, either as an optional extra or included in some policies that cover water damage. They are:

  1. Flash Flooding: a common definition for flash flooding is a flood that consists of a large volume of water that stays in place for only a short period of time. Often they are caused in semiarid areas by rainfall that is unusually heavy. They typically will peak in a matter of minutes and will bring with them large quantities of mud and debris.
  2. Storm Damage: the common definition is damage caused by a storm, which can be said to be a weather condition that is strong or violent such as strong winds, rain, hail, thunder, lightening and snow.
  3. Riverine Flooding: generally riverine flooding happens in low-lying areas that are located next to or near streams and rivers. These areas are flooded when the river or stream has an overflow of water that cannot be contained within its banks.

Many people in the flood affected areas thought that they were covered for floods however when they submitted their claims they were advised that they were covered for a different kind of flood and not the one that they experienced.

A number of insurance companies employed their own hydrologists to investigate individual claims to ascertain the true cause of the flooding – whether from the falling rain or from overflowing rivers or other sources of water such as the Wivenhoe dam, and they came back with conflicting conclusions.

The Insurance Review

The concerns that were raised about hoe the insurance claims were being handled in the wake of the Queensland floods sparked the Natural Disasters Insurance Review that was established by the Assistant Treasurer Bill Shorten on the 24th March 2011.

A series of disgruntled policyholders, locked in a stalemate with their insurers, have told the Queensland Floods Commission of Inquiry of disputes over what caused their homes to flood. Some of the issues that were to be investigated by the insurance review were:

  • Claims by homeowners that there was an obvious inconstancy in how claims were handled.
  • Some claims were rejected without an assessor visiting people’s properties.
  • Complaints about the length of time that it took for claims to be settled.

The Review terms of Reference 

**Reproduced from the Natural Disasters Insurance Review

The terms of reference for the review included:

  • The extent of, and reasons for, non-insurance and underinsurance for natural disasters;
  • The ability of private insurance markets to offer adequate and affordable insurance cover for individuals, small businesses and governments for natural disasters;
  • Whether there is a case for subsidising insurance premiums for individuals and small businesses in the areas of highest risk facing the highest premiums;
  • Whether there is a role for the Commonwealth Government in providing disaster insurance or reinsurance to the private sector;
  • The relationship between disaster mitigation measures and the availability and affordability of flood and other disaster insurance; and
  • Whether there is a need for a national disaster fund to support the rebuilding of public infrastructure in the aftermath of events such as the recent floods.