Flood maps can be unreliable, of varying quality or not detailed enough, Actuaries Institute representative Peter McCarthy has told the parliamentary inquiry into the insurance response to natural disasters.

Mr McCarthy, who chairs the institute’s general insurance practice committee, told the House of Representatives Social Policy and Legal Affairs Committee’s inquiry that such inconsistency is a real issue for insurers.

“If there is not enough detail in the flood maps, insurers find it difficult to do their assessment of the risk,” he said.

“As an example, there’s a flood map that says the flood at this level will eventuate once in 50 years, but insurers actually need to know what will happen once in 10 years, once in 20 years and once in 100 years to be able to do their assessment properly.”

Institute director Daniel Smith told the inquiry smaller insurers avoid writing insurance in areas with inadequate data. Far North Queensland is an example of where small companies don’t have enough information to know how to underwrite the risk.

“The less the information available, the thinner the market,” he said, adding that the fewer insurers there are willing to write the business, the more expensive premiums are likely to be.

Questioned on tenfold increases in premiums in certain areas, Mr McCarthy said insurers might not have understood the risk in a particular area.

Mr Smith said some insurers have covered for flood but didn’t price for it.

“Now that they’ve been hit they’re factoring the cost of the floods into their pricing, and that’s where you see those tenfold-style increases.”

He said be believed strata title policies had been severely underpriced for some time and were returning to where premiums actually should be.

The institute has proposed a national approach to flood mapping, and inquiry committee member Sharman Stone MP says the committee has found an “enormous variation” in mapping and in hydrologists’ skills.

Mr Smith said that the national flood insurance database contains “a big black spot over lots of Queensland; they just haven’t contributed or provided the information”.

He said many councils have flood information, but don’t make it available. “We need not only to have consistent ways of mapping but to make sure they’re available to everybody.”

The committee has heard that consumers often did not read their insurance policies but assume they are covered for flood.

Noting the many differences between insurance policies, Mr Smith said many consumers went for the cheapest premium or stayed with their existing insurer. He suggested it would be more useful to educate people about their exposure.

Information about flood risk should also be available to homebuyers, who might not know an area well.

The inquiry is expected to report its findings early next year.