The Insurance Council of Australia (ICA) is renewing its call for greater government investment in flood mitigation infrastructure, as insurers process more than 4,100 claims linked to recent severe flooding across New South Wales.
The claims – originating from the Mid North Coast, Hunter, and Greater Sydney – have prompted the ICA and major insurers to set up a temporary support centre in Taree to assist affected policyholders.
The hub opens this week at the Taree Leagues Sports Club and will operate until mid-June.
Speaking on national television over the weekend, ICA CEO Andrew Hall outlined the challenges insurers face in pricing and offering cover in known flood-prone regions such as Taree.
“When it comes to insurance for business, it’s different to homes. When you have a business, you opt into things, and one of the things you can opt into, is often, is flood. And the challenge for insurers when we come to towns like Taree, is that we know that the main street floods and we know that those businesses will be wrecked by flood,” he said.
He added that when exposure reaches one-in-20 or one-in-100 year probabilities, that translates to a 41% chance of flooding over a 10-year period. Insurers must account for that level of risk when underwriting policies, which inevitably affects availability and affordability.
Hall emphasised that commercial policies differ from home insurance, as flood cover is typically optional and often not taken up by small businesses. This leaves many enterprises exposed when disaster strikes.
“This is why we’ve been having a very long conversation now over a number of years with both state and federal governments about what we need to do to build flood defences, particularly for these regional CBDs,” he said.
Hall also noted that inflationary pressures have contributed to a surge in underinsurance, particularly in rebuilding costs.
“So, we are seeing a problem emerge around under-insurance, and that is driven not only by the events, but by inflation, so over the last 3 or 4 years, building costs have gone up around about 40%. And I think people are underestimating what it really costs to rebuild or restore your property after an event happens,” he said.
ICA data shows more than 220,000 homes on Australia’s east coast are built in flood-prone zones, with just 25% currently insured.
The average annual household income in these areas is around $56,000, underscoring the financial vulnerability of affected residents.
Hall reiterated the need for integrated mitigation strategies including flood barriers, elevated construction, property waterproofing, and, where required, voluntary government buybacks.
“We’ve got to build up our flood defences. It’s our biggest challenge. And to do that, we’ve got to work with communities. They have to make the decision about what they want to do, whether it’s building a flood levy, waterproofing homes, raising homes. And in worst case scenarios, we may have to consider buybacks like what’s been happening in Lismore and in some of the suburbs in and around Brisbane,” he said.
With extreme weather events expected to increase in frequency and intensity, the ICA is urging both federal and state governments to prioritise resilience measures.
Hall argued that while climate goals are essential, immediate investment in risk reduction is crucial for safeguarding communities and maintaining insurance availability.
“We’ve spent a lot of money over many years in Australia doing cleanup, and we build the same thing back in the same location and seem to presume it’s not going to happen again. When we build back these properties this time around, what we’ve got to do is invest more money into them so that they’re more flood resilient. The challenge in Australia is that we put a lot of money into recovery,” he said.
