THE head of the federal government's inquiry into disaster insurance has acknowledged that some households would struggle to secure flood insurance even if the industry was compelled to provide coverage.
John Trowbridge, who chairs the natural disaster insurance review, said private insurers have already attempted to increase their level of flood cover after being "badly stung" by the backlash directed at the industry after Queensland's flood disaster.
Mr Trowbridge's comments come as the nation's biggest insurers are expected to hand up their submissions to the review.
Both are strongly resisting calls for a compulsory flood coverage, arguing this would push up premiums and ultimately reduce competition, given it could cause global reinsurers to pull coverage from the market.
Suncorp has called for efforts such as importance of mitigation in flood insurance.
"The fact is, most Australian property owners do not need or want full flood insurance because over 95 per cent of Australian homes are located outside major flood zones," Suncorp's chief executive, Patrick Snowball, told a recent forum.
The Insurance Australia Group chief executive, Mike Wilkins, cautioned against the government launching a national disaster insurance scheme, claiming it could lead to risky housing developments in flood-prone areas.
The Insurance Council of Australia will also release its submission this morning, proposing a rebate scheme on insurance premiums for more than 130,000 properties that are based in high-risk flood zones. All told, 7 per cent of Australian properties are estimated to be in flood risk zones.
The rebate will be funded out of more than $4 billion annually collected by state governments from taxes on insurance policies, the Insurance Council chief executive, Rob Whelan, told as briefing last week. The Insurance Council is also expected to back risk mitigation programs to lower the risk of flooding on properties.
The national disaster insurance review is examining several flood protection options for the industry to consider. This includes compulsory flood cover for all houses; the ability for households to opt out of flood cover to save on insurance costs, and a flood insurance pool for high-risk houses.
Speaking at an Australian Centre for Financial Studies forum, Mr Trowbridge cautioned that even under a compulsory scheme insurance may not be available to everyone in flood-prone areas.
"Flood cover won't be completely available because there are risks that insurers find unattractive; they don't want to write them so they price them appropriately," Mr Trowbridge said. "If they offer it, then it might be on a basis that people can't afford."
Frequently Asked Questions about this Article…
What did the federal natural disaster insurance review say about the availability of flood insurance?
The review’s chair, John Trowbridge, warned that even if the industry were compelled to offer flood cover, some households could still struggle to secure or afford it. He said insurers may exclude unattractive risks or price them so they become unaffordable for some homeowners.
Are Australia’s biggest insurers backing compulsory flood cover for all homes?
No. Major insurers are resisting compulsory flood coverage, arguing it could push up flood insurance premiums, reduce competition and risk global reinsurers withdrawing cover. Suncorp and Insurance Australia Group have publicly expressed reservations and pushed alternative approaches.
What flood insurance policy options is the national disaster insurance review considering?
The review is examining options including compulsory flood cover for all houses, allowing households to opt out of flood cover to save on premiums, and creating a flood insurance pool to cover high‑risk houses.
What rebate proposal has the Insurance Council of Australia put forward for flood-prone properties?
The Insurance Council is proposing a rebate scheme for more than 130,000 properties in high‑risk flood zones, funded from the more than $4 billion a year collected by state governments through taxes on insurance policies.
How many Australian properties are estimated to be in flood risk zones?
The article cites an estimate that about 7% of Australian properties are in flood risk zones, while Suncorp noted that over 95% of Australian homes are outside major flood zones.
Could a national disaster insurance scheme encourage risky housing development in flood-prone areas?
Insurance Australia Group’s CEO Mike Wilkins cautioned that a national disaster insurance scheme might encourage risky housing development in flood‑prone areas, a key concern raised by industry when discussing a national approach.
How might risk mitigation programs affect flood insurance and premiums?
Industry groups, including Suncorp and the Insurance Council, are backing risk mitigation programs because reducing flood risk on properties can lower claims frequency and may help manage premiums and improve access to flood insurance for high‑risk homes.
What should homeowners and everyday investors watch for as the review progresses?
Watch for submissions from major insurers (already being handed to the review), any government decisions on compulsory cover versus opt‑out models, proposals for a flood insurance pool or rebate schemes, and industry moves on mitigation—since these choices could affect flood insurance premiums, availability and property risk assessments.
Call 1300 880 160
Start a chat
Schedule a call
