The traditional battlelines are again being acted out at the Natural Disaster Insurance Review (NDIR) following the closing of submissions.

On one side is the general insurance industry wanting everybody to \take responsibility for their flood risks, with most insurers only covering the risks of those with little exposure to disasters.

On the other side are councils and individuals wanting insurers to cover their property against flood with few exclusion clauses.

Reading between the lines of many of the more than 70 submissions, spreading the cost and risk to somebody else is a common theme.

The National Insurance Brokers Association (NIBA) is arguing that insurance is only one part of the solution to managing natural disasters in Australia.

In its submission to the review, NIBA proposes “a whole-of-nation resilience-based approach to disaster management”.

Not unsurprisingly, NIBA believes the review should not focus on insurance but on initiatives from federal, state and local governments, combined with private sector and consumer input which could include the insurance industry.

As part of this combined approach model, it wants publicly funded centralised flood mapping; compulsory disaster standards for planning; funding for improved infrastructure; and the removal of taxes from insurance.

“NIBA believes the above would be likely to act as an incentive to the insurance industry to increase offers of cover and reduce the price for the majority,” it said in its submission.

“The insurance industry’s reaction to such initiatives should, of course, be monitored carefully to ensure the benefits are passed on.”

NIBA also wants “appropriate government subsidisation of certain high-risk individuals for which flood cover would be unavailable”.

IAG has rejected the NDIR’s three proposals – automatic flood cover; automatic flood cover with opt-out; and maintaining the status quo.

“IAG does not believe that any of these options are in the best interests of the consumer, the community and the long-term viability of the insurance industry,” it says in its submission to the review.

The insurer believes any solution to flood insurance must include private insurers, a single definition of flood, clear and unambiguous product offerings, consumer education and government action to reduce the risk of flood.

It also wants subsidies for consumers in flood-prone areas to ensure they take out cover.

Suncorp argues in its submission that the NDIR proposals are “over-engineered, wasteful and impractical”.

It argues the focus is on just 7% of households in Australia which are at risk of riverine flooding.

“The extent of investment and administration costs to implement mandatory cover is not commensurate with the size of the problem,” Suncorp says in its submission.

“Full-scale risk assessment would be required for all flood and non-flood perils.”

The insurer estimates this would cost between $200 million-$300 million and argues the money would be better spent elsewhere.

“If a solution to flood insurance is required, it must be commensurate with the size of the issue. These proposals essentially stop just short of nationalising home insurance.”

Smaller players also get a word in, with strata underwriting agency CHU saying it believes automatic flood cover will not mean every household will be insured.

It argues government intervention would be required to ensure all households are covered.

“Our experience is that very few properties choose to insure for flood when presented with the additional cost of including flood into their insurances,” CHU says in its submission. “Automatic inclusion will impact to a greater extent on the socio-economically disadvantaged.

“When presented with no government requirement, those least able to afford a loss are the least likely to insure and [are] those most significantly affected by an event. 

“Ultimately, this means that government and non-profit organisations will bear the associated remedial costs.”  

FM Global Insurance says in its submission flood mapping by a federal body is required in Australia and a body such as Emergency Management in Australia should be charged with maintaining any database.

While the insurance industry is generally opposed to automatic flood cover, local governments firmly believe insurers should be the ones covering the risks.

Brisbane City Council says it categorically believes the commercial insurance industry is best placed to manage risk.

“Commercial insurance already covers most forms of natural disasters, with the notable exceptions of landslip and inundation by sea,” it says.

“There is no fundamental reason why the insurance industry should not underwrite flood risk – it is simply another natural disaster.”

The council accepts local government has a role to play in land use, related flood risk management and community flood awareness, but adds: “The council questions whether it is appropriate for local government to be involved in the business of insurance and does not support local government involvement in insurance premium subsidies.

“If subsidies are to be applied, the insurance industry should be responsible for cross-subsidisation – not taxpayers and ratepayers.”

The Australian Local Government Association (ALGA) also argues against its members playing any role in subsidising flood insurance.

“Regardless of the inherent merits of offering universal flood insurance, local government is opposed to using the rating system to cross-subsidise other non-essential local government services or private residential and commercial risks,” it says.

“ALGA does not believe this is a sufficient justification for rates to become a funding source for an expanded flood insurance scheme.” 

With neither insurers nor local government wanting to pay for flood insurance, perhaps the most innovative funding solution comes in a submission from WA resident Vic Smith, a Kwinana branch member of the ALP.

He suggests a “National Disaster Relief Lotto” on Friday nights to cover the losses from future disasters.

“This would be a far quicker way of raising money for disasters,” he says in his submission. “People will not trust disaster insurance.

“The insurance company will find a way to get out of paying for the disasters as they do with car, house and contents insurance covers.”