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 protection from a full range of natural disasters.
Coming after a backlash directed at the industry following summer's devastating floods in Queensland, Insurance Australia Group and Suncorp aim to have full flood cover as an option in all 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, regardless of their risk of living in a high-risk zone.
Currently, a little more than half the insurance polices purchased in Australia provides automatic cover for flood, with some policy holders caught out by not being covered for flooding as a result of rising rivers or creeks.
As submissions were handed over to the Natural Disaster Insurance Review, private insurers called 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.
IAG chief executive Mike Wilkins urged caution when it came to the government stepping in to provide a solution to flood insurance."We don't think there's been a systemic failure of the insurance market here," Mr Wilkins told BusinessDay.
Suncorp's head of personal insurance, Mark Milliner, said: "There should be mitigation rather than subsidisation of the flood problem."
Flooding regularly hits 7 per cent of residential addresses in Australia, causing about $450 million in annual damages, according to Insurance Council of Australia figures.
About $110 million has been spent on disaster mitigation by Canberra over the past four years, although insurers argue more should be done, given 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.
The council rejected proposals for the introduction of a government-backed insurance pool to cover flood risk, arguing this would be an expensive and complex exercise.
The council said some home owners in high
flood-risk areas should be given some form of government-backed subsidies to help pay for their insurance costs.
The review is scheduled to present its final report to the government by the end of September.
Frequently Asked Questions about this Article…
What change are major Australian insurers making to home insurance flood cover?
Insurance Australia Group (IAG) and Suncorp expect to introduce full flood cover as an option across their brands by early next year, which will substantially increase the number of households with automatic protection from a full range of natural disasters.
Why are IAG and Suncorp adding full flood cover to their policies?
The move follows backlash after devastating Queensland floods and is partly aimed at reducing the chance the government will step in and force insurers to offer flood cover to all customers, regardless of individual flood risk.
Do most Australian home insurance policies already include flood cover?
No. According to the article, a little more than half of insurance policies purchased in Australia currently provide automatic flood cover, meaning some policyholders have been caught out without flood protection.
Are insurers asking for better flood prevention rather than government subsidies?
Yes. Private insurers and industry leaders quoted in the article emphasize mitigation — preventing floods hitting residential areas — over broad subsidisation. Suncorp’s head of personal insurance said mitigation should be prioritised rather than subsidising the flood problem.
How common and costly are residential floods in Australia?
The Insurance Council of Australia figures cited in the article say flooding regularly affects about 7% of residential addresses and causes roughly $450 million in annual damages.
What has the government spent on disaster mitigation, and is it enough for flood protection?
The article notes Canberra has spent about $110 million on disaster mitigation over the past four years, but insurers argue more should be done because only a small proportion of that spending went to protecting homes specifically from floods.
Will the government create a national flood insurance pool to cover risk?
The Insurance Council of Australia rejected proposals for a government-backed insurance pool in the article, saying such a pool would be expensive and complex. The council instead suggested targeted, government-backed subsidies for some homeowners in high flood-risk areas.
Who is reviewing flood insurance policy and when will it report findings?
The Natural Disaster Insurance Review, launched by the Gillard government in response to the Queensland floods, is handling submissions from insurers and stakeholders. The review was scheduled to present its final report to the government by the end of September.
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