As many as 300,000 Australian households are vulnerable to a maximum flood event, says Insurance Council of Australia (ICA) Executive Director Alan Mason. And while the industry has come a long way to being able to provide acceptable levels of cover, some “fundamental problems” remain to be addressed.

The fundamental solutions are a bit scary, in a public relations sense. Mr Mason is maintaining ICA’s hard line on the ideal solution: compulsory flood insurance where everyone pays, whether they need flood cover or not.

Speaking at the ICA Queensland conference in Brisbane last week, Mr Mason said the industry has come a long way since the Townsville, Katherine and Wollongong floods of 1998 which caused so much negative publicity.

“There has been a significant improvement in the industry’s ability to research the physical exposures, and a number of insurers now offer some cover for flash flooding and a small number offer full cover on a risk-rated basis,” he said.

Research shows there are about 150,000 households in Australia subject to the risk of a one-in-100-year flood, but it is likely double this number are vulnerable to a probable maximum flood.

Mr Mason says ICA research to bring these numbers up to date should be completed soon.

“The cost of flood insurance to those in the highest-risk areas is too high, and most consumers will not buy it even if they obtain a quotation,” he said. “Not enough has been done over the years by all three tiers of government to limit further building and development in flood-prone areas and reduce the existing risk through mitigation works.”

Mr Mason says Queensland is one of the most vulnerable states to both flood and storm surge and the data available from local government sources “is patchy at best”.

“Nonetheless, governments are looking to the industry to play its part and provide a solution to the lack of cover. Every solution we have looked at, designed to provide universally available cover, requires community rating, where those who have low exposures or no exposures at all cross-subsidise those who do.”

He says any scheme must also be compulsory.

Pooling the risk may provide the answer, and the ICA board has given Mr Mason the go-ahead to establish a working party to look at a common definition of flood and develop some viable options by August.