The insurance industry has denied being to blame for underinsurance levels among Blue Mountains residents who lost their homes to bushfires.

Federal Shadow Minister for Emergency Services Mark Dreyfus used a visit last week to the Blue Mountains town of Winmalee – where a 2013 bushfire destroyed 200 homes – to claim many homeowners who chose to rebuild are underinsured because of inadequate information from the insurance industry.

“Building requirements introduced by state and federal governments to promote safety in areas at high bushfire risk have increased the cost of rebuilding, but insurance companies have failed to provide adequate or appropriate advice to homeowners to upgrade their insurance cover accordingly,” he said.

Mr Dreyfus has called on the “Abbott-Turnbull” Government to work with insurance companies to ensure future bushfire victims “do not face the same underinsurance problems that we are now seeing in Winmalee”.

He says people who live in bushfire zones need to be “fully aware of the level of cover they need should the worst occur”.

And he urged the Coalition to learn from his party’s response to the devastating 2013 Queensland floods when it was in power.

“The Gillard Labor government worked with insurers to clarify flood insurance policies and simplify the information around flood risk insurance so consumers were fully aware which level of cover they needed.”

But the Insurance Council of Australia (ICA) argues it is “primarily the responsibility of governments to explain to constituents the consequences of changes to laws or regulations that they enact”.

“The rezoning of bushfire-prone land is carried out by local governments in consultation with state and territory governments,” a spokesman said.

“Insurers are typically not informed or consulted about the process, and often do not have access to the data used by councils to inform their decisions.”

The council says insurers “continually urge policyholders to review their insurance cover to ensure it is adequate for their needs”.

“ICA continues liaising with state and federal governments to make natural hazard data more easily available to households, to improve their understanding of the risks they face,” the spokesman said.

insuranceNEWS.com.au reported recently (see earlier story) that residents in the bushfire-hit Victorian townships of Wye River and Separation Creek are underinsured following the State Government’s decision to upgrade the towns’ bushfire risk category.

The communities’ extreme risk rating means new houses must be built to tougher – and more expensive – bushfire-resistant building codes.

People whose homes were destroyed in the fires on Christmas Day last year, and who were covered under previous ratings, are finding themselves effectively underinsured because their payouts do not cover higher rebuilding costs.