The next challenge to the Australian insurance industry’s reputation is as close as the next flood, according to Insurance Council of Australia (ICA) Executive Director Alan Mason. Attacking “all three levels of government” for their inaction, he told the ICA NSW Conference in Sydney this morning a flood insurance scheme would have to be compulsory and universal to succeed.

“The industry has come a long way in its ability to research the physical exposures, and several insurers now offer limited cover for flash flooding or full cover on a risk rated basis,” he said. “But consumers still do not have adequate information available to them as to whether they are in a flood prone area or not.”

Noting that flood risk is a community problem rather than an insurance problem, Mr Mason said the fact flood insurance is not universally available at an affordable price “is a symptom of the underlying problem”.

Despite vastly improved policy documentation, the use of plain language and product disclosure statements, many consumers “still do not read this material and do not understand the scope of their policy coverage”.

“The cost of flood insurance to those in the highest risk areas is too high and most consumers [would] not buy it even if they could obtain a quotation.”

Mr Mason says governments are not doing enough to limit further building and development in flood prone areas or reduce the existing risk through mitigation works.

Promising that flood insurance issues will be high on ICA’s agenda this year, he said universally available flood cover in Australia requires community rating, “where those who have low exposures or no exposures at all cross-subsidise those who do”.

It would also require compulsion “so that people cannot avoid buying the cover”.