IAG says updates to its flood modelling have led to a small number of cases where coverage is no longer being provided to Coles home insurance customers.

The insurer sets premiums and risk ratings for home policies sold under the supermarket giant’s brand, with premiums assessed on an individual property level taking into consideration factors such as claims history, location and exposure to natural disasters.

“As part of a general update of flood modelling by IAG across its home insurance products, flood risks for some local areas have been changed,” a spokeswoman told insuranceNEWS.com.au.

“In a small number of cases, the updated flood risk profile for a property is such that IAG is no longer able to offer coverage.”

The changes reflect insurers’ more targeted underwriting across home policies, which can mean some homeowners benefit from falling premiums as their risks are revised downward, while others may experience higher rates or in some cases a withdrawal of capacity.

“Insurers use the best-available flood data to price risk-based premiums,” Insurance Council of Australia spokesman Campbell Fuller told insuranceNEWS.com.au.

“When fresh data is provided that improves an insurer’s understanding of the risk, fine-tuning of premiums may take place. Insurers also regularly assess their risk appetite for certain regions and may seek to increase or decrease their market share.”

The Coles changes were highlighted by a newspaper story last week quoting a Waterside Estate resident in western Sydney who had been told he could no longer gain cover because the property is in a high-risk flood zone.

In such cases policyholders are being contacted before renewal over the phone by a consultant explaining the changes and the next steps if they wish to have their flood risk reviewed, IAG says.

Flood risks in the region west of Sydney are also set to be examined by insurers following the release of data from the NSW Government’s Hawkesbury-Nepean Valley Regional Flood Study initiative.

Coles offers home, car and landlord insurance in partnership with IAG to more than 400,000 policyholders, according to a document released last year when the retailer was spun off from Wesfarmers and separately listed on the stock exchange.

See ANALYSIS.