AAMI now covers you for flood

If you held an existing AAMI Home Building Insurance policy or AAMI Home Contents Insurance policy on 5 February 2012, you will have your policy upgraded (by way of SPDS) to include cover for flood from 5 February  2012 until your first renewal date on or after 31 March 2012 (provided your policy remains in force). From 5 February 2012 new business customers will be covered under a new PDS, which includes cover for flood.

‘Flood’ means the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified; or any reservoir, canal or dam.

This definition of flood is consistent with the definition proposed by the Federal Government in November 2011 to be used in home insurance policies in the future. As at January 2012, the Government’s proposal is not yet law.

The upgrade to include flood cover applies to both Home Buildings and Home Contents personal insurance policies.

Yes, customers still have the benefit of AAMI’s Complete Replacement Cover under our Home Building Policy.

No, the Fire & Theft Contents (‘Renters’) policy provides cover under only a limited number of scenarios and is intended to be a low-cost product for people  with a small number of contents. As it does not provide cover for storm damage, it is not appropriate for it to include flood cover either.

If you held an existing AAMI Home Building Insurance policy or AAMI Home Contents Insurance policy on 5 February 2012, then you will not pay any additional premium for the new flood cover at this time.

At the first renewal on or after 31 March 2012, existing home and contents customers will be offered cover under a new AAMI Home Building PDS and a new AAMI Home Contents PDS, which include cover under the insured event ‘flood’.  The flood element of your renewal premium will be consistent with what we consider to be the level of flood risk at the insured address. That is, the higher we consider the flood risk to be, the greater effect the inclusion of flood cover will have on your premium.

Not necessarily. If we believe your insured address is at risk of flood, then you may see a significant rise in your premium due to that level of flood risk. However there are many other factors that influence premiums, including:

• Increases in the cost of repairing and replacing buildings and contents
• Increased reinsurance costs arising from catastrophe events such as the Queensland floods, Cyclone Yasi and the Victorian floods
• Availability of new data or information regarding natural perils and risks
• Your claims history
• The cost of claims we have paid to other customers

Please note that state and federal government taxes and charges make up a significant portion of your premium.

We have invested considerable time and resources researching all areas of Australia to map flood prone areas and assign risk estimates to each area. Our sophisticated pricing engine then allows us to price premiums at the individual address level, rather than post-code level. This means we are able to assess the specific level of flood risk your individual property is exposed to.

A medium to high risk of flood generally means that a property is either at risk of flooding more often or at greater severity than most Australian properties.

We have invested considerable time and resources researching all areas of Australia to map flood prone areas and assign risk estimates to each area, which means we are able to assess the risk of a flood on a property-by-property basis.

When determining a property’s flood risk we take into consideration a number of factors, including (but not limited to):

• Meteorological: for example, how much rain the insured property is likely to receive;
• Geographical: how close the insured property is to rivers, lakes or creeks;
• Topographical: the slope of the insured property, and whether, for example, it is at the top or bottom of a hill or in a ravine.

There are two answers to this question.  Existing customers will automatically be covered for flood until the date of their first renewal on or after 31 March 2012 (on the terms of the SPDS given to them and provided their policy remains in force). These customers will not be able to opt-out.

Some new business customers with a policy start date on or after 5 February 2012, and some customers renewing after 31 March 2012, may be eligible to opt out of flood cover.  Only insured addresses that we consider to be at a higher risk than most of flood will be eligible to opt out.  Those with lower or no flood risk will not have the chance to opt out, primarily because we expect they will pay little or no additional premium for the new flood cover.

We expect that well over 90% of customers will  pay little or no additional premium for flood cover, because we consider the risk of flood at their insured address to be low. The opt-out mechanism is designed to give the small proportion of people facing a significantly higher premium because of the risk of flood at their insured address, the choice of whether to insure, and pay, for flood cover.

Some new business customers with a policy start date on or after 5 February 2012, and some customers renewing after 31 March 2012, may be eligible to opt out of flood cover.  Only insured addresses that we consider to be at a higher risk of flood will be eligible to opt out.  

We will be looking at other AAMI products in the year ahead, but our priority was to implement these changes for AAMI Home Buildings and Home Contents products first as they did not provide flood cover. For now, the Landlord, Strata Title Landlord and Business@Home (Home & Contents) policies will continue to provide automatic flood cover pursuant to the respective PDSs.

As with any weather event or claims situation, AAMI’s approach is to look for ways to pay claims according to the policy in force at the time of the event. We will assess each claim on a case by case basis, as we always do.

AAMI will launch a new Home Building Insurance PDS and a new Home Contents Insurance PDS on 5 February 2012.  The new policies are different from the existing policies (one of the changes is the inclusion of flood cover) and it is important you read and understand the relevant Product Disclosure Statement.  New business customers with a policy start date on or after 5 February 2012 will receive the new PDS.  Existing customers will receive the new PDS when they next renew their policy on or after 31 March 2012.