Residents in South East Queensland and New South Wales are preparing for Tropical Storm Alfred on the three year anniversary of the historical floods which devastated the northern New South Wales town of Lismore.
Many will also be contemplating the often exhausting insurance claims process which can end up in protracted battles with insurers, as notoriously faced by Lismore residents and business owners in the aftermath of the 2022 floods. Insurance companies must do better, writes Commercial Litigation Partner and NSW Law Society Accredited Specialist in Dispute Resolution, Charles Lethbridge.
As Southeast Queensland and Northern New South Wales brace for the high winds, storms, swells and floods predicted by the arrival of Tropical Cyclone Alfred, many people will not just consider the practical precautions they can take to prepare for the storms, but also contemplate if they are fully protected by their home and building insurance should they need to make a claim in the aftermath of the extreme weather event.
After the waters had receded in Lismore, many residents reported facing an up-hill struggle to restore their homes, faced with protracted battles with their insurers.
What had started as minor flooding on the morning of 27 February, 2022, over the course of 24 hours accelerated dramatically to become a record-breaking catastrophe. The biggest flood in modern Australian history hit the small NSW town which sits at the junction of two catchments where the Wilsons River and Leycester Creek converge.
The Northern Rivers town was overwhelmed, with the natural disaster killing five people, and around 31,000 people having to leave their homes. Lismore residents were left bereft as the floods destroyed or severely damaged more than 80 per cent of homes in the town, some 1,399 of 1,720 residential properties.
Three years on, a lot has changed. Famous, former Lismore residents such as cricketer, Adam Gilchrist and local politicians have been quick to hit the headlines to demonstrate the regeneration of the town. Insurance industry body, the Insurance Council of Australia recently visited Lismore to meet businesses, government, and the community to hear how the region is recovering and rebuilding. The Council say more than 242,000 claims were lodged at a cost of $6.4 billion to their members.
I am curious to learn how the council’s efforts were received by the people hit the hardest in the town, given the floods left homeowners and businesses with the sky-high costs amid ever diminishing availability of insurance, threatening the viability of living in the town or owning a business.
According to Business NSW, insurance remains the top issue for businesses, surpassing energy costs, tax, rent, and wages. Their members say insurance premiums were increasing by around 30 per cent per year, becoming so prohibitively expensive, that they are effectively uninsurable. This jeopardises not only individual businesses, but also the broader economic stability of Northern New South Wales.
The current insurance market fails to meet the needs of modern businesses with standard insurance products, slow decision-making processes and inflexible payout structures. For example, for those policyholders who do manage to secure payouts, restrictions on how they use the insurance payout often means they must rebuild exactly as before, perpetuating vulnerabilities to future disasters.
Those whose claims are rejected, are often led to drawn out legal disputes, as business owners find themselves fighting with their insurers to honour their policies. Worse still, competition in the insurance sector is deteriorating, as homeowners and businesses in the town have been left with fewer options, higher premiums, and diminishing coverage. This is the cruel paradox in which Lismore residents have found themselves, a stigmatised, flood prone area.
The Australian Financial Complaints Authority (AFCA) received more complaints about Lismore floods insurance claims than any other disaster, except COVID. More than 2,000 complaints were made. Tellingly, three quarters of the claims were found to be in favour of the insured.
This demonstrates something is clearly wrong with the way insurance companies are handling claims, further exemplified by reports that homeowners sharing the same insurers and policies as their next door neighbour are having different claims outcomes, despite having almost identical claims.
Last October, the Federal Government released their long awaited, final report and recommendations for the inquiry into insurers’ responses to the 2022 major floods claims.
Some promising recommendations included;
- Improving affordability for existing policyholders with high flood risk properties
- Stating insurers should cover the cost of temporary accommodation while claims were dealt
- Clarity for policyholders on rights and risks of cash-settlement offers
- Acceptance of insurance claims if an insurer takes longer than a year to make a decision
For some campaigners though, this does not go far enough, and they have called for regulators to release data on how long companies took to assess claims and resolve disputes, arguing this information, if released publicly, can only support insurance policy holders.
We can—and must—do better to support claimants. Throughout my career in commercial litigation, I have witnessed first-hand the devastating impact that prolonged claims have on my clients and their families. During what is often the most traumatic period of their lives, the last thing they need is yet another battle with an insurance company just to rebuild what they have lost.
Why should claims be so protracted? Can there really be no way we can find a common ground to make claims more transparent for policy holders and insurance companies alike?
The 2022 Lismore floods were devastating for residents and some insurance companies’ responses made tragic circumstances, worse. I welcome the Federal Government’s findings from the inquiry into insurer’s responses to the floods claims and look forward to the implementation of their recommendations. The people of Lismore deserve the legacy of what happened to them and their town, to count for that at least.
