Insurers have largely welcomed the Federal Government’s decisions to rule out premium subsidies for policyholders in high-risk flood zones and to not make it compulsory for all household policies to offer flood cover.

The Government announced its position on the issues in its response to the Productivity Commission report Barriers to Effective Climate Change Adaptation.

Suncorp’s EGM Customer Product and Pricing for Personal Insurance Natasha Fenech told insuranceNEWS.com.au Suncorp agrees with the Government’s decision not to proceed with premium subsidies for those at high flood risk.

“We need to reduce the risk for everybody rather than just for high-risk homes,” she said, adding that mitigation also addresses the issue of community safety in catastrophe events.

On the subject of compulsory flood insurance, Ms Fenech says Suncorp has “always held the view that customers should have the choice”.

IAG’s CEO Direct Insurance Andy Cornish told insuranceNEWS.com.au the company “is pleased the Government has recognised that intervention in the insurance market to create a reinsurance pool and require insurers to provide certain products is not a viable, long-term solution to insurance affordability in areas highly exposed to extreme weather”.

He says NRMA Insurance supports mitigation works, but believes there must also be a stronger focus on appropriate land use planning and building standards.

Acknowledging the affordability problem that the widespread rollout of flood cover has created in the home and contents market, he says NRMA Insurance will “continue to work with the Government on options to help ease that pressure in the short term”.

Allianz Australia GM Corporate Affairs Nicholas Scofield says Allianz also backs the Government’s decision not to make flood cover mandatory.

But he says Allianz did recommend a flood reinsurance pool in its submission to the Natural Disaster Insurance Review, and supported “a well-designed subsidy mechanism that was incorporated into domestic property insurance in a way that does not undermine insurance pricing and risk selection principles”.

He says Allianz considers the Government’s lack of response on the issue of affordability as “an opportunity lost”.

“Allianz remains concerned about the affordability of insurance cover against flood,” he told insuranceNEWS.com.au. “Simply put, offering average homeowners that are highly vulnerable to flood risk premiums of $10,000 to $20,000 or more for flood cover is not a sustainable state of affairs.”

Also see ANALYSIS