Flood insurance not such a sure thing anymore

THE head of the Gillard government's probe into disaster insurance has acknowledged that some households will struggle to get flood insurance even if the industry is compelled to provide coverage.

John Trowbridge, who chairs the Natural Disaster Insurance Review, said private insurers had already attempted to increase their level of flood cover after being ''badly stung'' by the backlash that followed the Queensland flood disaster.

Australia's two biggest insurers will this morning hand in submissions to the National Disaster Insurance Review. Both are strongly resisting calls for compulsory flood coverage, arguing it would push up premiums and ultimately reduce competition because it could cause global reinsurers to pull coverage from the market.

Suncorp, one of the country's biggest insurers, has said the importance of flood mitigation should be stressed to householders.

''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 chief executive Patrick Snowball told a recent forum.

Insurance Australia Group chief executive Mike Wilkins has 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 release its submission this morning, proposing a rebate scheme on insurance premiums for more than 130,000 properties in high-risk flood zones.

This scheme would be funded out of the more than $4 billion collected each year by state governments from taxes on insurance policies, Insurance Council chief executive Rob Whelan told an insurance 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 options on flood protection for the industry to consider. They include 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 might 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,'' he said. ''So, no matter how far the industry goes in trying to offer cover, it won't be able to satisfy everyone. If they offer it, then it might be on a basis that people can't afford.''

The Insurance Council estimates that 7 per cent of Australian properties are in flood-risk zones.