A Government-backed flood insurance scheme for householders in high-risk areas is again being raised following the latest Queensland and northern NSW floods.

Rather than availability being at the centre of controversy, it is now the affordability of flood insurance that is being attacked – and in particular the cost of cover for those most at risk of flooding.

John Berrill, a panel member of the Government’s Natural Disaster Insurance Review (NDIR), which was conducted after the 2011 Queensland floods, says that despite the increase in the number of insurers offering flood cover, a lot of people still do not have flood insurance because they can't afford it. 

Mr Berrill, who is head of Maurice Blackburn’s insurance litigation practice, says the NDIR’s recommendation of a system of mitigation-linked premium discounts for high-risk properties funded by a Government reinsurance facility should be reconsidered.

“It’s a big commitment and it’s a complex issue, but we’re still of the view that that is a reasonable way forward,” he told insuranceNEWS.com.au.

Independent senator Nick Xenophon has joined Mr Berrill in calling for the introduction of a federal natural disaster insurance scheme.

Senator Xenophon plans to push for a Senate inquiry into the establishment of a scheme similar to the National Flood Insurance Program in the US, which provides government-underwritten flood cover at discount premiums for those in high-risk areas, providing local communities invest in flood mitigation.

He has described the US scheme as “successful”, despite it being nearly $US18 billion ($17.3 billion) in debt.

“Given that potentially hundreds of thousands of Australians can’t obtain affordable flood insurance, there is no reason why a similar approach shouldn’t be adopted here,” Senator Xenophon said.

Following last week’s floods in Queensland, the blame game has begun afresh, with Ipswich Mayor Paul Pisasale attacking insurers over premium increases, while Nationals senator Barnaby Joyce has called for a Senate review into insurance companies.

Consumer group Choice has also joined in, criticising the insurance industry for what it calls “massive” hikes in home and contents premiums due to mandatory flood cover or repricing of existing cover.

Choice claims its research shows “that major insurers are also using inconsistent techniques to assess flood risk, including Google Maps and ‘secret’ assessments that they will not reveal to homeowners, local government or the National Flood Risk Information Portal”.

Meanwhile both the Insurance Council of Australia (ICA) and the National Insurance Brokers Association (NIBA) have welcomed comments by Queensland Premier Campbell Newman that governments must direct more funding to mitigation measures to help protect communities from the next disaster.