Flooding in NSW and QLD triggers insurance catastrophe response

Road closed ahead prepare to stop traffic warning sign on flooded road. Image taken in Queensland, Australia.

The Insurance Council of Australia declared an insurance catastrophe across large parts NSW and South East Queensland earlier last week following the devastating storms and flooding over the weekend.

News reports from around the country estimated that flooding from the recent weather events stretched 600 kilometres from Sydney to the Northern Rivers and inundated areas of the Gold Coast hinterland, Logan and Albert River catchments. On Monday 22 March more than 18,000 residents were evacuated and 200 schools closed in NSW. (ABC News)

As of Thursday, 25 March, policyholders in NSW and Queensland had lodged more than 17,000 claims and the ICA estimated the total value of the claims across both states at $254.2 million*.

WHAT IS AN INSURANCE CATASTROPHE AND HOW DOES IT IMPACT ME?

According to the General Insurance Code of Practice (Section 9) “the ICA will declare an event to be a catastrophe when it results in a large number of claims and involves multiple insurers”.

When an insurance catastrophe is declared, the ICA mobilises additional resources to help insurance customers and insurers, including a disaster hotline and an industry taskforce. The Catastrophe designation also requires insurers to give priority to impacted customers and mobilise their disaster response specialists.

An extreme weather event such as a severe cyclone, bushfire, flood or storm will trigger the catastrophe designation. It’s important to understand that an insurance catastrophe response is not the same as or linked to Government Disaster declarations or funding.

AM I COVERED FOR FLOOD?

There are different types of “flood” including;

Damage caused by rainwater runoff
Flash flooding due to heavy rain
Natural watercourse flooding
Flooding due to releasement of a catchment area (dam)
Flooding due to storm surge
Flood due to rise in seawater or tidal

Source: Canstar

Insurance policies typically do not cover flooding from storm surges, tidal or rise in seawater.

Flood definitions and cover can also vary for each policy but the industry-wide definition is;

The covering of normally dry land by water that has escaped or been released from the normal confines any of the following: (a) a lake (whether or not it has been altered or modified); (b) a river (whether or not it has been altered or modified); (c) a creek (whether or not it has been altered or modified); (d) another natural watercourse (whether or not it has been altered or modified); (e) a reservoir; (f) a canal; (g) a dam.

According to Legal Aid Queensland “Most insurance policies provide cover for damage caused by a flood unless you have opted out of flood cover.”

The Insurance Council of Australia Disaster Website stipulates;

“If you opted-out of flood cover in your policy, your insurer will typically arrange for an independent hydrologist to inspect your property in order to determine whether the inundation was from flood or stormwater.

Inundation to your property can be caused by a combination of both flood and stormwater. If this is the case, and you opted-out of flood cover, your insurer may reduce your claim by the amount of damage it determines was caused by the floodwater, but you will still be insured for the damage caused by the stormwater.”