The Insurance Council of Australia (ICA) has warned its members they must contribute to the creation of a universal flood definition or an “uninformed” Federal Government will do it for them.

Insurers have been bluntly told by the peak body that a “do nothing” approach is not an option as negotiations with Assistant Treasurer Bill Shorten over a standard flood scheme definition enter their third month.

In a communiqué circulated to ICA members on March 1, CEO Rob Whelan outlines two approaches for insuring flood but concedes consensus on a single definition “is unlikely”.

“Regardless, it is important that industry influence the adoption of a definition that meets the needs of the majority of insurers,” Mr Whelan told members.

“There is no do-nothing option unless insurers are happy to leave the decision to a government uninformed of the risks and realities of underwriting the flood risk.”

Feedback from insurers arising from a February 10 discussion paper suggest two ways to address concerns about flood – by defining all sources of water causing damage, or defining flood with certain restrictions.

With 86% of committee members opting for a flood definition approach, the most popular definition of flood is: “The covering of normally dry land by water that has escaped or been released” from a lake, watercourse, reservoir, canal, dam or stormwater drain.”

Mr Whelan says taking a “general approach” to defining flood means the “primary criticism relating to flood definitions is defeated”.

“Isolation of the term flood and flooding to one meaning alone leaves less doubt regarding the policy use of the word into the future,” he said.

He says insurers will need to re-examine use of the word “flood” in other contexts to prevent confusion.

ICA members have until Friday to submit their preference for a flood definition. Last month ICA promised the Federal Government it would create a standard definition for flood, but wants its members to able to modify and amend that definition as they see fit.