I spent many a yonk on the phone to CoverMore today to ask about swine flu & their cover.
I was told that their cover depends on the World Health Organisation's rulings (which are the basis of DFAT advice). If WHO says travellers should not go to a destination, then there will be no cover for those who choose to go there anyway after the ruling was issued.
If a traveller is already in a country when a WHO ruling is issued then he/she should contact CoverMore to arrange to leave. In this instance, if the traveller has arrived before the WHO ruling was issued & contracts the flu, then he/she will be covered as for any other illness etc contracted overseas.
Posting this FYI only - talk to your Insurance Co & satisfy yourself, naturally.