Ms Gillard echoed comments by Assistant Federal Treasurer Bill Shorten, who was scathing of insurers after they failed to front angry disaster victims at a meeting in Ipswich on Tuesday.
Mr Shorten said the no-show was "corporate cowardice" and Ms Gillard agrees, saying the government will name and shame companies that lacked the backbone to face their customers.
But she said Australia had an open, competitive economy and the government could not simply order insurers to pay up.
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Ms Gillard said the government was working hard to erase ambiguity over the definition of a flood, which has been blamed for many people's insurance claims being knocked back.
Mr Shorten used the Ipswich meeting to release a single, standard definition for floods in a discussion paper that aims to end the confusion.
The definition is expected to be considered for inclusion in legislative changes to be introduced later this year.
Under the proposed standard definition, "flood" means the covering of normally dry land by water that has escaped or been released from the normal confines of: (a) any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or (b) any reservoir, canal or dam.
Ms Gillard said what happened at Ipswich was shameful.
"They (insurers) didn't stump up, they didn't have the courage to go and we are very, very critical of that lack of courage and ability to sit with Queenslanders and work their issues through," she told the ABC.
"The performance yesterday was a cowardly one and I think there's evidence that around Queensland individual claims have been treated in a callous way and that should not be happening."
