Allianz will change the way it provides flood cover after reviewing its householder products in response to the 2022 floods, prompting a distinction between low- and high-risk areas.

Flood will be included as standard cover for new customers taking up home building, contents and landlord policies from late this year. New customers will no longer be able to opt out of flood.

Existing home customers in low- to moderate-risk zones, who have not previously opted for flood cover, will also have the risk included as standard.

Allianz says the change will have a “modest” effect on premiums: the average annual flood premium impact for policyholders with a low risk will be less than $20 before taxes; for customers seen as moderate risk, the average pre-tax premium impact is less than $100.

“As a result of this change, existing customers with a low to moderate flood risk, and all new policyholders, will have the confidence that they are covered for flooding, regardless of whether it is caused by rainwater run-off or riverine flooding,” the company told insuranceNEWS.com.au.

Existing customers in high-risk areas who have no flood cover can continue with the status quo.

“This is because the flood premium for these customers can be in the tens of thousands of dollars, and making flood cover standard could threaten their ability to retain home insurance,” Allianz said.

For such customers, Allianz says its flood exclusion will extend to rainwater run-off, in addition to the standard definition of flood.

“This will speed up the claims assessment and decision-making process because there will no longer be a need for a hydrology report to assess flood damage claims,” the insurer said.

Last September, Allianz told insuranceNEWS.com.au it was reviewing whether it was viable to continue offering optional flood cover in its householder products.

“The review found that optional flood cover resulted in delays for some customers because of the need for hydrology reports, and confusion about coverage for many customers who had not purchased flood cover,” Allianz said. “When a customer does not have flood cover, hydrology reports are required to assess whether a partial claim for rainwater run-off can be paid, even if they are unlikely to have an eligible claim for damage caused by riverine flooding.”

Allianz says it had to commission more than 1000 hydrology reports after the 2022 floods.

“In addition to a significant cost, this resulted in long delays due to the demand and supply imbalance for hydrology services. For Allianz’s existing home insurance customers who continue to not have flood cover, the extension of their flood exclusion to exclude rainwater run-off, in addition to riverine flooding, will negate the need for hydrology reports to distinguish between riverine flooding and rainwater run-off.

“This approach will avoid the delays created by the need for hydrology reports, resulting in quicker decision-making and improved clarity of coverage for policyholders.”

IAG says its NRMA Insurance brand automatically includes cover for all ground-up water damage – flood, rainwater run-off and storm surge – for home products sold in NSW, the ACT and Tasmania. The same applies to its RACV-branded products in Victoria.
 
A spokesperson says customers may opt out of flood, rainwater run-off and storm surge cover after reviewing IAG’s view of flood risk at their property. The decision will be made in “discussion with their insurer [NRMA Insurance or RACV], depending on their level of risk and subsequent premium. Flood, rainwater run-off and storm surge cover cannot be removed individually.”
 
The spokesperson says all other states and territories have mandatory flood, rainwater run-off and storm surge cover.

At Suncorp, flood cover is included as standard in home insurance products, with only AAMI customers in high-risk locations able to opt out, according to a spokesperson.

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