A temporary pool of funds should be created to subsidise the rising costs of flood insurance to consumers, according to the actuaries’ lobby group.

Actuaries Institute CEO Melinda Howes has called for a pool “to subsidise the high insurance premiums of people living in disaster-prone areas”.

“A national pool could also help those people who are not in flood areas but have seen premium increases,” she said.

The institute does not favour direct government subsidies to policyholders because it results in the money going straight to insurers, “providing no incentive for households or local councils to manage their own risk exposure”, Ms Howes said.

“It’s vital that any subsidies provided from the pool are conditional on policyholders and local councils taking action to reduce the risk of damage from flooding, such as carrying out the appropriate property renovations and building levees in high-risk areas.”

The actuaries’ call for a pool is in direct contrast to the stance by the Insurance Council of Australia (ICA), which says short-term direct government subsidies are the best mechanism.

ICA CEO Rob Whelan says a flood pool would only create another layer of government bureaucracy.

In a statement last week he reiterated the basis of ICA’s July submission to the Natural Disaster Insurance Review, proposing direct subsidies to owners of high-risk properties that would taper off after several years.

“We believe the first homebuyer’s grant scheme is an appropriate guide,” Mr Whelan said. “Policyholders and taxpayers should not pay for a pool when there are other better remedies.”

He called for the Productivity Commission to examine how best to provide affordable insurance to at-risk communities.