TWO of the nation's biggest insurers expect to introduce full flood cover by early next year, substantially boosting the number of households that will have automatic protect from a full range of natural disasters.
Coming after a backlash directed at the industry following last summer's devastating floods across Queensland, Insurance Australia Group and Suncorp are aiming to have full flood cover as an option across all of their brands.
The move is partially aimed at heading off the prospect of the government stepping in and forcing insurers to offer flood cover to all customers, including those living in high-risk zones.
A little over half of the insurance polices now bought in Australia provide automatic cover for floods, with some policy holders caught out by not being covered for flooding caused by rising rivers or creeks. Suncorp now offers automatic cover across some, but not all, its brands.
The industry yesterday presented a unified front as a raft of submissions were handed over to the Natural Disaster Insurance Review, with private insurers calling for greater efforts to be made in preventing floods from hitting residential areas. The review was launched by the Gillard Government in response to the flooding disasters that hit Queensland earlier this year.
The IAG chief executive, Mike Wilkins, urged caution when it came to the government's stepping in to provide a solution to flood insurance, declaring the system was not broken.
"We don't think there's been a systemic failure of the insurance market here," Mr Wilkins told BusinessDay. "There is a market-based solution for flood cover to be implemented. The way in which that cover has grown in terms of availability over the course of the last four years demonstrates there is a viable market for this [insurance] out there."
The head of personal insurance at Suncorp, Mark Milliner, said: "There should be mitigation rather than subsidisation of the flood problem. The objective should be having less Australians living in flood-prone areas within the next 10 years."
Flooding regularly hits 7 per cent of residential addresses in Australia, causing some $450 million in annual damages, according to Insurance Council of Australia figures.
About $110 million has been spent on disaster mitigation by the federal government over the past four years, although insurers argue more should be done given that just a small proportion was spent on protection from floods.
"A repeat of 2011 flooding, damaging the same homes, will be a failure of mitigation, not a failure of private market insurance," the Insurance Council of Australia said in its own submission.
The ICA also rejected proposals for the introduction of a government-backed insurance pool to cover flood risk, arguing this would be expensive and complex. It said some homeowners in high-risk areas should be given some form of government-backed subsidies to help pay for their premiums.
The review is to present its final report and recommendations to the government by the end of September.
Frequently Asked Questions about this Article…
Are Insurance Australia Group (IAG) and Suncorp planning to introduce full flood cover?
Yes. According to the article, IAG and Suncorp expect to introduce full flood cover as an option across their brands by early next year, which should increase the number of households with automatic flood protection.
What does ‘full flood cover’ mean for home insurance customers?
Full flood cover means policies will include protection against flooding risks that previously might have been excluded or optional. The article says the move will substantially boost the number of households with automatic protection from a full range of natural-disaster flood events.
Do most Australian home insurance policies already include flood cover?
Not all. The article notes that a little over half of insurance policies bought in Australia currently provide automatic flood cover, and some policyholders can be caught out because their policies don't cover flooding from rising rivers or creeks.
Why are insurers like IAG and Suncorp expanding flood cover now?
The expansion follows public backlash after devastating Queensland floods and is partly aimed at heading off government intervention. The insurers presented a unified industry position to the Natural Disaster Insurance Review and want to promote market-based solutions while urging more flood mitigation measures.
Is the government going to create a national flood insurance pool or force cover for high‑risk areas?
The article says the Natural Disaster Insurance Review is considering options, but insurers and the Insurance Council of Australia (ICA) have rejected proposals for a government-backed insurance pool as expensive and complex. Insurers introduced wider cover partly to avoid the prospect of government mandates, and the review is due to present a final report by the end of September.
How much damage do floods cause in Australia and how common are they?
The Insurance Council of Australia figures cited in the article say flooding regularly affects about 7% of residential addresses in Australia and causes roughly $450 million in annual damages.
What are insurers recommending: mitigation or subsidies for flood risk?
Insurers in the article favour mitigation over subsidisation. Suncorp’s head of personal insurance, Mark Milliner, said the objective should be fewer Australians living in flood‑prone areas within the next 10 years. The ICA also argued that repeated damage would reflect a failure of mitigation rather than a failure of private insurance. However, the ICA suggested limited government‑backed subsidies could help some homeowners in high‑risk areas pay premiums.
What does the Natural Disaster Insurance Review mean for investors in insurance companies?
The review, launched by the Gillard Government in response to recent floods, is shaping industry policy and public expectation around flood cover. The article describes insurers proactively offering wider flood cover and making submissions to the review. For investors, outcomes from the review (including recommendations on mitigation, subsidies or regulation) could influence insurer product offerings, claims exposure and public policy over the near term.
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