While on the surface the Federal Government’s commitment to flood mitigation funding seems to answer some prayers for the insurance industry, it may turn out to be a case of being careful what you wish for.

In making the announcement, which is aimed at reducing flood insurance premiums, Prime Minister Julia Gillard said the insurance industry has been “put on notice” over flood insurance rates, subtly implying that it has been price-gouging rather than pricing to accurately reflect the true flood risk faced by some communities.

The funding also comes tied to a new pricing watchdog, the National Insurance Affordability Council, which will monitor affordability and undertake as yet unspecified “other functions directed at reducing natural disaster insurance premiums”.

Suncorp Personal Insurance CEO Mark Milliner says Suncorp has already begun “premium repricing programs” in towns where evidence has been provided of mitigation work and its benefits.

Other insurers had better follow suit – and fast.

As to how the $100 million has been allocated, the $50 million commitment to raise the wall height of the Warragamba Dam in western Sydney represents just 10% of the estimated $500 million required for the project.

NSW Premier Barry O'Farrell has not yet backed Ms Gillard’s dam plan due to the inadequacy of its funding offer, while the more cynical are describing it as a political stunt to curry favour across a swathe of marginal seats in western Sydney that are a must-win for the Labor Government if it is to win the national election in September.

The Insurance Council of Australia says raising the dam wall will lessen the flood risk for more than 50,000 homes, but experts in the field say that the project in isolation is not enough to protect the Hawkesbury-Nepean community.

John McAneney, MD of natural hazards research centre Risk Frontiers, told insuranceNEWS.com.au that raising the dam wall is “helpful” but “doesn’t necessarily solve the problem”.

Professor McAneney says changes to the dam’s operating procedures to enable it to be operated for flood mitigation must also be made, while better land use management in the region is also required.

Because the dam was built for water storage purposes, its operating rules currently prevent water from being pre-released to create additional room when the dam is nearing capacity, which would assist in holding back floodwaters.

An expert in the field is consultant Drew Bewsher, who recently completed a floodplain risk management study for the Hawkesbury Council. He echoes Professor McAneney’s sentiments.

Mr Bewsher told insuranceNEWS.com.au the funding is “a very welcome contribution but it’s not enough on its own,” adding that building code changes to how new properties are built and updated dam operating procedures are needed.

The NSW Government is considering changing the dam’s operating procedures as part of its current review of mitigation options in the valley, with the findings of its review due by the end of the year.

Meanwhile, reaction in Queensland to the flood mitigation measures has been mixed.

Ipswich City Council welcomed its $10 million in funding which is allocated for nine flood mitigation projects in Redbank Plains, Brassall, Raceview, Yamanto, Thagoona and Rosewood.

But Ipswich Mayor Paul Pisasale continued his attack on insurers, calling on the industry to assess flood risks at an individual address rather than postcode level.

“It is not fair that residents and businesses in an entire postcode are punished with excessive premiums when only a small area is ever likely to flood,” Mr Pisasale said.

The funding was also welcome news for the Maranoa Regional Council, which covers Roma, with the Federal Government’s $7 million, in addition to $1.25 million already committed by the council and $7.42 million from the Queensland Government, enabling the first stage of the Roma flood levee project to be completed.

But Maranoa Mayor Robert Loughnan says the full project, estimated at a total cost of $30 million, still needs another $11.8 million in funding.

Queensland Premier Campbell Newman was less satisfied, describing Queensland’s allocation of $17 million as “nowhere near enough”.

Mr Newman wants $40 million from the Federal Government to match the Queensland Government’s own contribution to its floodplain security scheme.

In a barbed statement that ignores the hazard faced by residents in the densely populated Hawkesbury-Nepean community, Mr Newman expressed disappointment “at the decision to spend $50 million in an area that is significantly less flood-prone than several Queensland communities which had been devastated by multiple flood events over the past three years”.

He singled out Emerald, Rockhampton, Maryborough and Bundaberg as deserving of a “bigger slice of the funding pie”, while Gympie was reserved for special mention.

“The people of Gympie must be wondering how much suffering they need to endure before the Gillard Government puts their livelihoods before votes in western Sydney,” Premier Campbell said. 

Some members of the insurance community would agree. While the Federal Government is finally beginning to take flood mitigation seriously, a superficial $100 million election year handout scattered around multiple projects is a start – but it’s a long way short of what’s needed.