The Insurance Council of Australia (ICA) has criticised Choice's review of flood insurance as irresponsible, claiming it may frighten at-risk property owners away from obtaining insurance.
Consumer group Choice has published its 2011 Shonky Awards, with the insurance industry receiving one for "calamity after the storm".
The group claimed "thousands of homeowners were left high and dry by insurance companies that rejected their claims following the 2011 Queensland, NSW and Victorian floods".
Among the biggest culprits were CommInsure, CGU and RACQ - with around 15 per cent of claims being knocked back, according to Choice.
The awards summary for this category stated that policy holders were dissuaded from making claims, that the claims process was confusing and complex, and that flood cover often did not cover floods.
However, the ICA chief executive officer Rob Whelan said only 725 of 130,000 flood insurance claims resulted in disputes, and those have been referred to the Ombudsman.
"In 2008 the insurance industry agreed to a standard flood definition, but it was rejected by the [Australian Competition and Consumer Commission] at the time," he said. "In January the industry again called for a standard definition of flood, and repeated this in May in its submission to the Natural Disaster Insurance Review."
"Handing out dummy awards is a stunt, not a solution; it's not worthy of CHOICE," Whelan added.