WESTPAC has ordered its staff to sell home and contents insurance to people living in areas at high risk of flooding only if they have a mortgage with the bank.
It becomes the latest institution to make things harder for homeowners trying to get basic protection for properties in NSW and Queensland since the recent extreme rain and floods.
The internal memorandum was sent to the entire banking group on Friday and its order became effective on Saturday.
"For immediate action ... customers in high-risk flood areas will need to have a Westpac Group mortgage over the property to apply for cover," the memo said. "Please note this only applies to 2.5 per cent of properties across Australia."
The memo was issued so that Westpac sales staff know how to respond to inquiries from people worried about their homes after the recent devastating floods.
It comes less than four weeks after the chief executive of the bank's Australian financial services division, Brian Hartzer, made a widely publicised tour of flood-ravaged Queensland.
He pledged $100,000 to the Premier's Disaster Relief Appeal, saying Westpac was committed to helping Queenslanders recover from the floods.
"Coming so soon after the floods of 2011, this is a major blow for Queensland," he said, "but we know how resilient the state and its people are, and Westpac is committed to help."
The decision will be a blow to residents in flood-affected regions of northern NSW and Queensland who face steep premium rises from a smaller pool of insurance companies that are still prepared to offer insurance.
A Westpac spokeswoman confirmed the policy change but would not say why the decision had been made. "Because we now price [our insurance] based on households rather than postcodes, customers in higher-extreme-risk areas will require a Westpac mortgage to get home and contents insurance," she said.
"But there still remains an option to review based on individual circumstances ... and the order will only apply to new customers and will not be applied retrospectively."
The decision comes after one of Australia's biggest insurers, Suncorp Insurance, stopped offering home and contents insurance last year to the Queensland towns of Emerald and Roma after paying out millions of dollars due to the 2011 floods.
Two weeks ago, the insurer said it had already paid between $200 million and $220 million in claims this year for floods in NSW and Queensland, and bushfires and storms in Tasmania and Victoria.
A real estate agent in Cairns, Nathan Shingles, said huge insurance premium rises were forcing down the value of Queensland property. "I've been getting calls from concerned property owners about their renewal notices coming in at more than 100 per cent of last year's premium value," he said.
"I've just got my own renewal through Suncorp in the last week and it's gone from $3000 a year to $7500 ... [and] my home is built to to withstand a fierce cyclone."