Who is really covered?

With the recent spate of natural disasters and environmental issues, insurance has become more of a concern, according to industry expert George Peters

With the recent wave of natural disasters, the area of insurance has never been more critical, according to George Peters, Business Development Manager at Melbourne’s Andrew Young and Associates Insurance Brokers.

“Up to 2011 the Australian insurance industry has paid in excess of $16 billion in claims,” Peters says. “You can go back through to the Black Saturday bushfires, to the flooding, and now we’re seeing earthquakes and catastrophes all over the world. Insurance is a critical area and people need to understand that.” Natural disasters around the world have got everybody on edge at the moment, Peters says. “I’ve got people who aren’t in areas of concern but they want to be insured just for piece of mind,” he says.

“We’re seeing live footage of tragedies, which has never been experienced in history, so of course we’re all getting jolted, and thinking ‘what happens if it happened to me?’ It’s getting very close to home and these tragedies are happening in all areas, floods, bushfires, earthquakes, and now this nuclear threat in Japan.” While insurance is designed in a way where the premiums of the many pay out the claims of the few, lately it’s the claims of the many, Peters says. Australia is inherently one of the cheapest countries in the world for insurance, Peters says. “I think we’ve been relatively spoilt. Current figures show we’re paying something in the order of $50 to $60 million a day in claims, that’s everything: commercial, homes, motor vehicles, but when you look at those figures those people would be in diabolical trouble if they weren’t insured. It’s pretty critical people turn around and realise, ‘I’m working like a dog to build up a family home, how about protecting it accordingly?’.”

One of the largest issues of concern is people not reading their insurance policies properly, Peters says. “It’s pretty typical not just with insurance policies, but also with manuals, home loan policies, etc. It’s not uncommon but it is important. Unfortunately people need to understand that until they have a claim they don’t realise the consequences.”

Flood cover in particular, in today’s terms, is far more available in the marketplace so there’s no excuse to not be covered, Peters says. “We advise appropriately, if you are prone to flooding there are companies out there that have a standard policy that includes flood cover.”

People may not realise the difference between insurance covering storm damage and flooding, Peters says. “Flood means the inundation of normally dry land by water escaping or being released from the normal confines of any natural water course/channel or lake, whether or not altered or modified, in other words reservoirs, canals, dams, rivers,” Peters says.

If a flood occurs because the water has risen from any of these areas typically people without flood insurance are not covered. “If it’s raining and water comes through your roof it’s storm damage and you’re covered for that, but if a river’s burst its banks and flooded you, if it does not include flood cover then you’re not coveredw”. The danger of not being properly insured was demonstrated through Queensland’s recent flooding, Peters says.

“Queensland weren’t insured for infrastructure, all the other states have got insurance and they pay hundreds of millions of dollars in premiums per year to cover themselves and rightfully so because look at the tragedies we’re getting.” Commercially there aren’t too many companies that offer flood coverage. One or two companies on the market will offer it as standard, some will offer it as an option, and some won’t at all, Peters says. Also if you have full comprehensive insurance on your motor vehicle flood insurance is typically covered, however this would not be the case for fire, theft and third party only insurance.

“Again people need to do their research and get appropriate advice,” Peters says. Amidst the current phenomenon of catastrophes the insurance industry’s main priority is saving people’s lives first, but secondly, saving their belongings, Peters says. “We want to get them back to the place they were before the tragedy happened. If you’re not properly covered then it’s hard to do anything, and that’s why, as an industry, we may need to look at all these incidents and climate issues and start having blanket covers for people,” Peters says.

“Insurance policies would go up but at least you’ll know you’re covered, your neighbour is covered and your family are too.” A surge of DIY insurance has seen retailers like Coles and Myers now offering home and car insurance, which leaves people to their own devices, Peters says. “We study comprehensively to be an advisor and the industry and legislation is constantly changing and is so diverse these days,” he says, adding, “people will ring up and just get insurance and not realise they’re not covered for what they’re doing in their own home”.

The average person has a home office now so there’s a new area of requirement, Peters said. “We’re starting to see a lot more home owners have a home office or their shed might be their storage area or they might put a shipping container in backyard to supply from there. People do hairdressing or run accounting practices from home. The typical home environment has changed so the industry needs to evolve with it.”