Some of the 212 homeowners who lost their properties in last year’s Blue Mountains bushfires may not be able to rebuild, because building policy changes left them unwittingly underinsured – and insurers are being blamed for not informing them.

“When we hear that these people, in good faith, insured their homes only to find out… that the added cost of complying with the NSW Government bushfire building code is up to $200,000 and beyond, we all feel disbelief,” Blue Mountains City Council Mayor Mark Greenhill told insuranceNEWS.com.au.

The council says it has received 104 development applications following the fires, including 68 for new homes.

The council and insurers disagree on who is to blame for failing to inform homeowners of policy changes that raised building costs.

The Australian Standard for construction in bushfire-prone areas was updated in 2010.

“The Insurance Council of Australia (ICA) and its members have been trying to deflect their responsibility by suggesting local government inform their policyholders of the adequate insurance required to cover the true costs of rebuilding their homes to the standard set,” Cr Greenhill said.

He says insurers knew of the changes after major bushfires in Victoria and Tasmania, and should have told people so they could adjust their coverage.

The council has contacted ICA and the Australian Prudential Regulation Authority with its concerns.

ICA says it is not insurers’ job to communicate policy changes.

“Local governments are best equipped to inform ratepayers about changes to bushfire zonings and building codes and the impact this might have on building costs, because these fall under their area of responsibility and authority,” a spokesman said.

“Often the insurance industry is not aware of where local planning regimes have changed that may trigger a requirement to rebuild to higher standards.”

National Insurance Brokers Association CEO Dallas Booth visited an ICA community information meeting soon after the October bushfires.

“I got the impression at that meeting that very few people knew about the new building standards,” he told insuranceNEWS.com.au. “It seems to me there’s been a failure of regulation on quite an important change.”

He says regulators must do better at communicating policy changes, because sums insured are critical.

Mr Booth has written to member brokers several times urging them to take care on property sums insured and changes to building standards.

Policyholders should check insurance calculators to ensure sums insured are correct or contact brokers for advice, he says.