The vagaries around claiming flood insurance could be removed, with the Australian Competition and Consumer Commission proposing to grant conditional authorisation to the Insurance Council of Australia for a common definition of 'inland flood'.

Floods regularly affect wide tracts of rural Australia, with prime farming areas in Victoria's Gippsland region and Central Queensland suffering in recent times.

"Flood insurance has become a critical issue for Australian consumers in recent years, with a number of reports identifying unsatisfactory levels of consumer confusion about insurance cover for flood," ACCC chairman Graeme Samuel said.

The Insurance Council has put forward a proposal which would, if authorised by the ACCC, see insurance companies voluntarily adopting a common definition of inland flood.

"The ACCC considers that the proposed standard definition has the potential to result in benefits to consumers, predominantly by helping consumers to better understand their policies and for what damage they are covered," Mr Samuel said.

The ACCC has proposed a number of conditions which are aimed at improving the transparency of the Insurance Council's proposal.

These conditions will also strengthen the consumer education campaign proposed by the Insurance Council.

"An effective, comprehensive consumer education campaign is an essential element of any proposal aimed at helping consumers to better understand the complex issues surrounding flood insurance," Mr Samuel said.

"While a common definition will go some way towards addressing consumer confusion, the proposal does not seek to address consumer concerns about the availability, adequacy and extent of flood cover.

"It remains important that consumers check their policies to see if they are covered for flood.

"Consumers should talk to their insurer if they have any questions."

* The ACCC's draft determination will be available from the ACCC website.