Across the Northern Territory, recovery from weeks of rain and flooding continues with many major roads still inaccessible and communities cut off. For brokers, a familiar insurance challenge is back again: customers think they know what “flood” means but insurers often define it more narrowly or differently than expected and brokers end up in the middle explaining why one type of water is covered while another may not be.
This is not a new industry headache. Australia introduced a standard flood definition more than a decade ago, yet flood remains arguably one of the most disputed and least intuitive terms in general insurance.
The standard flood definition was legislated by the Gillard government after the 2010–11 floods and exposed how differently insurers were using the term. The plain English version of this definition used by the Insurance Council of Australia (ICA), says flood is the covering of normally dry land by water that has escaped or been released from the normal confines of a lake, river, creek, watercourse, reservoir, canal or dam. But the ICA also says flood cover can still be offered as a standard inclusion, an inclusion a customer can opt out of, an optional extra, or not at all. In commercial policies, flood is generally something customers must opt into.
The result is that, in 2026, Australia has a standard legal definition of flood for key domestic policy classes but not a standard market position on flood cover. Insurers do not all offer flood cover on the same basis and the ways different inundations of water cause damage can get very different treatment across the market.
For brokers, the practical problem is a client may assume “flood” means any major water damage. However, a policy, if it covers flood, may split a flood event into flood, storm, rainwater run-off, storm surge or action of the sea. By the time those distinctions become important, the property is usually already damaged and the relationship risk has shifted to the broker.
Sure Insurance says its home products include “Automatic cover for flood” and “Automatic cover for cyclones and storms, including storm surge.” That places it among the insurers offering a relatively broad proposition, especially because it pairs flood inclusion with storm-surge cover.
“We are a shop that says flood is included automatically and you cannot opt out,” said Brad Heath, managing director of Sure Insurance.
His firm’s flood definition is also in plain English. “For us, you are either covered for flood or you are not,” said Heath. That includes coverage for the storm surge, overland and riverine impacts that other insurers often exclude.
NRMA is likely one of the closest large-brand comparisons. Its contents insurance says it covers damage caused by “flood, rainwater run-off, storm, storm surge and tsunami,” while its PDS separately lists both “flood or rainwater run-off” and “storm surge or tsunami” as insured events. In some jurisdictions, NRMA says customers may be able to remove flood, rainwater run-off and storm surge together, but not one by one.
AAMI says flood is automatically included in eligible home policies and cannot be removed, yet also says sea or ocean movements such as storm surge, high tides and wave action are not covered. Allianz likewise says flood is standard in new home and landlord policies from January 14, 2025, while stating that its home policies do not cover storm surge.
For brokers, this is where the trouble can start: clients hear a headline promise, but the detail that determines the claim often sits in the fine distinctions around runoff, surge and sea damage.
Sure is perhaps unusual in pairing flood with broad storm-surge cover and presenting the proposition in a more stripped-back, customer-facing way in both a directly sold and broker facing offering.
“The reason for that is that the differentiation between no flood, flash flood and other types of flood versus full-blown flood is too hard to define and manage in the variations of events that give rise to it," said Heath.
He said there are areas of extreme or very high flood risk that his firm cannot insure and in those cases doesn’t offer flood cover. He gave a hypothetical example of a property insured for a basic $300,000 sum insured but with a $20,000 premium that would cover flood.
“If you are offering such a high technical premium for high-risk flood, the credibility of your offering really comes into question,” said Heath. “I think it is unfair on the customer.”
He said in cases like this, insurability comes into question and pursuing answers through government intervention needs to be looked at.
Technology and cooperation is improving the way insurers see and quantify flood risk – but that may only make things more difficult for properties in high risk areas because it is becoming easier for underwriters to single them out. For example, the National Flood Information Database (NFID) is an insurer-run, non-public flood risk database first released by the ICA in 2008, built from government flood studies and specialist modelling. This commercial-in-confidence system is now used by most insurers to help price flood risk at an address level and covers, according to the ICA, nearly 14 million individual properties.
For brokers, even though they can’t see it or use it, the NFID database is increasingly shaping who will write a risk for their clients, at what price and on what flood terms.
However, beyond the underwriting process, one major flood challenge is still the same for brokers: If their client has flood cover, what does the insurer mean by it, what exactly does it cover and does the client understand that.
