Much of the infrastructure replaced after the 2011 Queensland and Victorian floods has not been improved and will fail again during future floods of a similar magnitude, according to the Insurance Council of Australia (ICA).

CEO Rob Whelan says in a submission to the Productivity Commission’s draft report on barriers to effective climate change adaptation that disaster mitigation funding in Australia is not robust and is failing to protect the community.

The submission says governments’ failure to mitigate risks has affected the growing cost of reinsurance, which in turn has led to premium increases and some cases of reduced capacity to offer cover.

Government payments for disaster recovery exceed mitigation funding by many orders of magnitude, and the ICA submission says reducing community exposures to hazards should instead be the focus.

Calling on governments not to intervene and distort insurance markets, it says the price of insurance products drives adaptation.

Communities need to understand their risks and those at high risk should pay higher premiums for those risks while those that adapt to hazards should see lower relative premiums, ICA says.

Making any class of insurance product compulsory may narrow choice. It also ignores the primary drivers of risk which can cause a significant non-insurance and underinsurance problem.

“ICA submits that short-term targeted subsidies for insurance premiums, payable by governments directly to those individuals facing the highest risks and who lack the capacity to adapt quickly, is a measure worth considering, but only as an interim step while mitigation is undertaken,” Mr Whelan said.

The submission calls for a systemic approach to supporting local governments with toolsets such as the building resilience rating tool, legislative guidance, funding and nationally consistent datasets to drive adaptation to extreme weather impacts.

It notes the existence of “a considerable gap” between community expectations of property durability and minimum building standards, adding that building codes should be amended to address resilience to extreme weather.

ICA supports a consistent approach to community-level risk disclosure that includes web-based tools, community signposting including roadside poles that indicate flood levels, and “household markers” in extreme risk locations, as well as disclosure in title documents, property certificates, rates notices and tenancy agreements.

Household markers include any physical marks or signs placed on the outside of the property that provide information about the risk of future flooding and the extent of historical flooding, such as the depth. Councils also sometimes put stickers inside house meter boxes to advise of flood risk.

It supports reasonable measures to limit the liability of local authorities in regard to planning decisions associated with the uncertainty of climate change.

The submission says the insurance industry has started work on the building resilience rating project to develop a tool allowing property-owners and architects to calculate the extreme weather resilience of different building materials and methods. In future the tool could link a building’s resilience to its insurability.