Insurers have started to act on flood cover – but will the Federal Government step up to the mark and do its share of the heavy lifting required to prevent a repeat of last year’s disasters?

The risk of political inaction is a lopsided response to flood risk that increases the price of insurance to people who decide to opt out of cover altogether – the reverse of what the reviews set out to achieve.

Many of those attending last week’s Regulatory Update conference organised by the Insurance Council of Australia (ICA) expressed concern that momentum might be lost now the inquiries are over.

The silence from the Government on any move to start a national approach to flood mapping and mitigation is particularly worrying.

It’s a reasonable concern for many in the industry who have seen the flood issue raised at the political level previously and dropped once the news cycle has moved on. 

And of course the issue is complicated further by the Government being distracted by the leadership battle and the instability inherent in running a minority government.

Wesfarmers MD and ICA President Rob Scott has called for a greater commitment from the Government to get moving on mitigation and flood mapping, while ICA CEO Rob Whelan points out that the situation will only worsen while development continues on flood plains.

General Insurance Ombudsman John Price says the industry is more advanced than the Government in implementing many of the changes that are necessary from last year’s disasters.

But he told the conference that with the increasing availability of flood cover, affordability will become an issue.

“Is there an unintended consequence from having flood cover that we have a lot of people who simply cannot afford insurance any more?”

Consumer advocates are also concerned that the industry is implementing flood cover when there is no subsidy mechanism to cushion the impact on people in high-risk areas, as recommended by the Natural Disaster Insurance Review (NDIR).

Consumer Action Law Centre co-CEO Catriona Lowe was not the only speaker to refer to household budgets being under pressure and says she is hearing “scary stories about electricity prices”.

The consumer groups want more people to have insurance but say the cover has to be affordable.

Many of the conference participants noted that a positive outcome of last year’s disasters is the closer relationship between the Government, industry and consumer organisations and a willingness to work together to find solutions.

One message from the conference is that the various groups do see last year as a “game-changer” and want to get the response right, even if their views differ on how to achieve the best outcome.

It seems they will all have to push harder to get the Government to step up. The NDIR report went to the Government on September 30 and was released to the public in November. The Government is considering its response.

The NDIR recommends a Commonwealth Government agency be established to manage the co-ordination of national flood risk management and run a scheme of premium discounts. State governments and local councils would still be responsible for flood mapping but the agency would be an information portal and also be able to develop initiatives on mitigation.

It will be no picnic trying to get three levels of government to work together, but the agency will be able to raise awareness and make information widely available after last year’s inquiries found councils often have flood data but it is hard for people to get.

Comprehensive flood mapping will allow insurers to price to risk and send consumers, developers and councils a hip-pocket signal about the cost of building a house in an area that gets inundated.

It’s all going to take time, which is why delays in responding to the considerable effort of the last year have many worrying that the opportunity for change may be lost.

Insurers, brokers, public servants and professional and community organisations have done substantial and valuable work in highlighting the issues around flood and insurance and offering solutions, while people whose homes were wrecked made the effort to front up to inquiries and tell their often-harrowing stories.

There was considerable momentum around disasters last year. Now it’s time for governments – both federal and state – to get moving.