Flood survivors are opting for cash settlements "almost out of exhaustion" as they deal with insurers in the wake of the catastrophe.
Households across the eastern states hoping to rebuild their lives in the aftermath of major flooding in 2022 are ill-prepared to fight insurers, an inquiry heard.
Federal Labor MP Daniel Mulino said people traumatised by their experiences had agreed to settle with insurers simply because it was too much to deal with.
"People were agreeing to cash settlements probably less than what they might have been entitled to if they had pushed their case more strongly or had better advice," he said.
"There were some cases where people agreed almost out of exhaustion."
Mr Mulino made the comments on Friday as committee chair of a parliamentary inquiry that is looking into insurers' responses to the floods.
The Australian Competition and Consumer Commission (ACCC) chief executive Sarah Proudfoot was particularly concerned by the lack of clear communication from insurers.
People had been making insurance-related decisions in times of "great personal difficulty", the CEO said, and it was important to get information across "in a way that they can understand what they're making decisions about".
Representatives from the consumer watchdog appeared before the committee on Friday.
Insurance is not a product people particularly want to deal with but rather "something they need", Ms Proudfoot told the committee.
"Any recommendations we make are not around improving the volume of information people receive but the quality and relevance of the information," she said.
As concerns were aired at the committee hearing, Prime Minister Anthony Albanese was in Eugowra in central west NSW looking at recovery efforts from the 2022 floods.
"I'll never forget houses that had been moved by hundreds of metres - some had just been destroyed," he said, referring to a trip to the region in the immediate aftermath.
"We know recovery will take time and we want to be there with the community."
Eugowra residents faced their own troubles with insurance, federal independent MP Andrew Gee, a committee member, said at the same media briefing where Mr Albanese spoke.
The committee will finalise a report by September.
