CGU CEO Peter Harmer has identified a backlash against rising insurance premiums as the next major reputational issue facing the insurance industry.

Mr Harmer made the comments in a speech to the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Victorian annual lunch last week.

He warned inevitable price rises which follow natural disasters such as this year’s floods could be labelled as “gouging” by politicians, the media and the public who do not fully understand the relationship between increased risks and rising costs.

“As Australia is subject to increased severe weather and customers want more perils such as flood to be included in insurance policies, customers will be asked for higher premiums to cover these risks,” he said, adding that the industry must be more active in helping stakeholders understand the drivers of increasing costs and their impact on premiums.

“It’s hard to explain why the premium of a customer in metropolitan Melbourne will be affected by floods in Queensland and earthquakes in New Zealand, let alone hurricanes in America.”

Mr Harmer says the industry was “blind-sided” by the amount of negative media and government interest it received after this year’s catastrophes.

“We have seen some negative commentary following storm and flood events before, but nothing close to the scale of what we experienced earlier this year. The industry was caught on the back foot by the level of negativity expressed by the community and the resulting media coverage, political and customer comment which followed these events.”

He says the timing of the floods, following on from the aftermath of the global financial crisis, had not helped ease the animosity towards the industry.

“The fact that the world economy was essentially brought down by complex financial products that consumers didn’t understand has made people suspicious of complexity in financial products, which is a big challenge for a complex business like insurance.”

Mr Harmer says the industry must manage issues more effectively.

“It’s easy to concentrate on who is right and who is wrong when these kind of issues emerge,” he said. “Managing issues effectively and proactively is what gives you permission to talk about the good that you do. It makes people want to listen.”