The trauma inflicted by ‘badly mishandled’ insurers flood response

Flood-affected communities have been left traumatised and heartbroken by insurers following major flood events in 2022, a new report has found.

Insurers’ responses to major flood events at the end of 2022 have left people across the east coast traumatised, out of business, and at the mercy of long drawn-out insurance policy payouts.

That’s according to the committee chair of an inquiry into the handling of insurance claims following major flood events across eastern Australia in late 2022.

More than 80 recommendations are outlined in the House of Representatives standing committee on economics report, published Friday, following an inquiry into insurers’ responses to the flood claims, with flood mitigation measures recommended.

Committee chair and Labor MP for Fraser Daniel Mulino said the report acknowledged many claim cases were “badly mishandled” with long delays causing “emotional, mental health and financial strain”.

The report made 86 recommendations, including ensuring the General Insurance Code of Practice be registered with ASIC and making the code enforceable through insurance contracts.

It was also recommended the federal government consider measures to improve the affordability of flood insurance for existing policy holders with high flood-risk properties, “including the appropriateness of a government supported reinsurance arrangement.”

NSW lawyer and farmer Kirsty Evans has spent more than 250 hours and two years working pro bono on a number of claim denials for individuals and businesses in Molong.

The result of her efforts is more than $1 million being returned to people after initially receiving a rejection from their insurers following the November 2022 flood event.

“In November 2022 we had a one in 500-year thunderstorm … we didn’t get much sleep and we woke and saw our normal creek line was engulfed by water, and it was coming up through crops,” Ms Evans said.

The impact of major flood events in late 2022 have been quantified in a recent report. Picture: Jason Edwards

“What followed then is our community got in and did the clean up. My husband went into town … I knew the best way I could hold a broom as such was to lodge insurance claims. I started texting friends and asked them to send me their last policy. It snowballed from there.”

Ms Evans said in the two years since the floods, she has observed “consistent failures throughout the (insurance) process), with slow claims processing taking its toll on residents.

“In some cases, 100 per cent of family incomes are gone, the longer the insurer drags on the claim,” Ms Evans said.

“When you’re in a community, I sit in an office in town and my kids go to the same school, this is my local post office, when I was with a client who received a first denial and she was absolutely heartbroken … I felt helpless at times. I want to wrap them in a huge hug and tell them not to give up.

“We had another client who after the flood event lost everything … she ended up going through trauma counselling not because of the flood, but because of the denial. We had to help her rebuild from scratch to help get her policy.”

Public hearings into the inquiry, including one at Rochester in Victoria which has been flooded successive times, detailed poor treatment and a range of systemic problems, with long delays and disputes over causation resulting in “emotional, mental health and financial strains for many families”.

Ms Evans said better incentives to encourage flood mitigation strategies in rebuilding flood-affected properties should be part of dealing with future natural disaster claims.

“Another thing would be the vulnerability of the policy holders, when you’re getting on the phone and speaking to these people, there’s no identification that this person has potentially lost everything, and dealing with all these people,” Ms Evans said.

A number of recommendations addressed mitigation, including development of a climate financing framework relating to government mitigation and adaptation funding, and that the General Insurance Code of Practice be amended to require insurers consider relevant property-level mitigation measures.