Commercial flood cover in high-risk regions remains an issue for the insurance industry as take-up by businesses remains low, a Suncorp executive says.

SMEs were hard-hit by flooding and heavy rainfall in Townsville earlier this year, with many businesses having chosen to avoid price increases triggered if flood is included in policies.

Suncorp Manager, Major Loss and Event Claims for Corporate and Speciality Glenn Green told last week’s annual Claims Convention in Sydney that the industry has focused on domestic flood cover problems since the Brisbane flooding in 2011, but the Townsville catastrophe highlighted remaining issues.

“We obviously did sort out those complexities around flood cover and flood definition in our home and domestic policies, but I don’t think we changed too much in our commercial policies,” he told the convention last week.

“There is now an opt-out for consumers, but we still have opt-in for commercial.”

In the wake of the Townsville event, many businesses are saying that flood cover is too costly or that it was a rare event that won’t be repeated anytime soon, despite rising risks from climate change, he said.

“There is still a degree of complacency in customers understanding what their risk might be.”

Insurance Council of Australia (ICA) GM Risk Karl Sullivan also said commercial cover is a problem, while other issues to emerge from Townsville included rising water damage repair costs and the impact of unethical claims preparers.

“There is a legitimate need for some professional claims management for some people who may be vulnerable and need that help,” he said. “But unlike in Brisbane, we are now starting to see in Townsville quite rapacious activity from some of these stakeholders.”

Claims costs in Townsville have been “much higher” compared with the Brisbane flooding, with the industry under pressure to replace materials regardless of their condition.

Claimants often assert that materials may have been exposed to sewage or couldn’t be adequately cleaned and present a health risk.

Mr Sullivan says politicians are avoiding a focus on mitigation as the long-term answer as they search for alternative fixes, such as mutuals and reinsurance pools.

“When Treasury does the maths for them, none of that works,” he said. “The only way to solve this, to get the affordability down to a point where a commercial player can offer a product at an attractive rate, is to actually reduce the risk, to stop the probability of water coming in the front door.”