Insurers say lessons have been learned from floods throughout 2022, and acknowledged failures to policy holders after major flooding events, including the October 2022 event in Victoria.
The admissions came at House Standing Committee on Economics entered its second week of hearings, where they heard from the Insurance Council of Australia and a number of insurers on Monday.
Last week the committee heard from consumer groups and regulators who outlined "cavalier and combative" behaviour from insurers after flood events throughout 2022 along the east coast.
ICA chief executive Andrew Hall apologised on behalf of the industry "to those whose claims were not handled to the standard our industry strives to achieve in 2022".
He said the flooding event tested the sector's systems, processes and staff "like never before".
"Insurers and their staff worked day and night to meet the needs of their customers, the majority of whom had their claim in a satisfactory way," he said.
"But not all systems and processes of insurers passed the test, and this had very real impacts."
He said a commissioned review from Deloitte found claims processes were tested more than ever before, and issues were exposed in many areas when processing claims, from complaint handling responses to internal resourcing.
Shortages in building material, accommodation, rental cars and a tight market for skilled workers were among the challenges for the insurance sector after the flood.
"It's no secret that as we emerge from COVID, insurers were struggling to fill the vacancies we had," Mr Hall said.
"We are constantly looking at all options to find the skilled staff to help customers and manage claims."
He said $7.5 billion was incurred in claims throughout the 2022 floods and said 230,000 properties faced a five per cent risk of flood each year.
Suncorp group chief executive Steve Johnston said he had visited communities who had been impacted by floods in 2022, and he sought out cases where there were deficiencies to see where things have gone wrong.
He said he always looked to work with staff to improve working with communities.
"I do recognise that we don't always get it right, that our communications can be deficient and that in a small number of cases, we don't properly identify vulnerabilities," he said.
He said 1373 claims out of 51,500 claims associated with flood events in 2022 that were lodged with Suncorp were still outstanding.
"We're closing around 80 a week at the moment... and we expect to have that number down to 600-500 by the end of the financial year," he said.
The committee also heard about a case of a woman who was forced to sack two employees she considered family following a flood event, but was told by an insurance company the lay offs were a "business saving".
The case was raised to highlight an apparent disconnect between insurers and the customers they served.
Independent MP Andrew Gee said greater compassion was needed from insurance companies.
"A system like this is broken," he told insurers the hearing.
Nick Hawkins from Insurance Australia Group said causing further harm to people experiencing loss was never the aim.
"It's extremely disappointing from my point of view to hear that," he said in response to the woman's experience.
Insurance companies often escalate claims from vulnerable people to specialist teams with trauma training, the committee was told.
Aggrieved customers are regularly locked in protracted mediations to negotiate an outcome with their insurers.
Mr Gee said the overwhelming majority of customers were successful, meaning their hurt was exacerbated for little benefit.
Mr Hawkins said his company was working hard to improve the experience of its customers.
- with Australian Associated Press