Five years have passed since Brisbane was inundated with water and insurance failures took centre stage, but despite a range of actions, flood cover remains a difficult issue.

The devastating east coast low pressure system that hit last month has provided the latest test for insurers and policyholders.

The storms that swept across Queensland, NSW, Victoria and Tasmania again brought cases in which some householders and businesses faced the consequences of lacking flood cover.

Tasmanian senator Jacqui Lambie vows to pursue a parliamentary inquiry if insurers have acted “unconscionably or unethically”, while the Insurance Council of Australia (ICA) has organised forums in Picton, south of Sydney, and in northern Tasmania to hear complaints and address issues.

ICA says most people were covered and their claims accepted, but there is still progress to be made on the issue.

ICA data shows only 0.9% of residential property claims from the storms have been denied, while in the commercial arena that increases to 1.7%.

“It is actually a very tiny number of people who have purchased a product that is not responding,” ICA GM Risk and Disaster Planning Karl Sullivan tells insuranceNEWS.com.au.

“The vast bulk of people are buying a product that is suitable for their risk circumstances.”

The level of residential cover varies slightly between states and territories, but overall about 94% of domestic building policies are purchased with flood insurance, according to ICA. Of the remainder, policies either specifically do not include flood cover or the customer has opted out.

Reasons can include not knowing they are in a flood risk area, saving money, taking a view that an event is unlikely to happen or simply not understanding what is at stake.

High premiums and locations near water are flashing risk signals that are sometimes ignored, or gambled against at the property owners’ peril.

LMI Group founder and MD Allan Manning notes that an insurer that does not want to cover flood will “just price it out of the ballpark”.

With commercial insurance sold through brokers, there is more scope for making risk management judgements against including the cover.

Previous confusion over when cover applies has led to a standard wording that defines flooding as the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or natural watercourse, whether or not altered or modified, or any reservoir, canal or dam.

Mr Sullivan says sometimes people are unaware they are in a flood zone, and local and state governments need to provide adequate information.

“Some of them do it very successfully and others don’t do it at all, or they do it in a way where it can be challenging for a person to find out,” he says. “But when you distil it all down, it is still the asset owner’s responsibility to inform themselves about what... could occur at their location.”

When a property is awash, an owner in the middle of a crisis can view it as splitting hairs when an insurer rules whether water flowed from heavy rain through the roof, blocked drains or a spilling watercourse. Following the recent east coast low, insurers have sent in hydrologists to assess to what extent costs can be met by storm damage provisions in policies, with mixed outcomes.

In Picton, Suncorp and QBE determined customers will be fully covered under the storm section, while IAG says it will fully pay 80% of claims.

Professor Manning says governments and councils are continuing to create problems by encouraging development in flood-prone areas, where it is expensive to insure against the risk, and setting up communities for future problems.

Co-operation between all levels of government and the various industries affected is needed to find solutions, he says.

Australia’s climate and geography, which features a relatively flat landscape and flood-prone watercourses, suggest the issue will remain a difficult one, particularly as the population expands in line with historical patterns.

“Unfortunately, we have built in the wrong places,” Professor Manning tells insuranceNEWS.com.au.

“We like to be next to the water, but as I tell people, if you want to have water as your neighbour, don’t be surprised if it occasionally comes and visits.”