An increase in frequency and intensity of extreme weather events is not the main driver of increasing losses, according to the Insurance Council of Australia (ICA).

The growing number of properties, increasing building costs and inappropriate construction are to blame instead, ICA says in a Senate submission.

Premiums have begun to grow proportionally with increases in the risks to and value of insured assets, and increasing costs should help property owners see which risks are intolerable and drive change, the council says.

To improve insurance affordability and availability and prepare communities for extreme weather, the Building Code of Australia should be modernised to include minimum requirements for extreme weather durability, ICA says.

It calls for improvements to land-use planning criteria to take local hazards into account, improved mitigation planning and funding, appropriate hazard disclosure by governments to the community and the removal of insurance taxes to encourage personal risk mitigation.

The council says risk is a function of three variables: hazard, exposure and vulnerability.

Debate on climate change effects has focused on the hazard – the frequency and intensity of a peril – but rising exposure of wealth and populations are causing the increased costs, ICA says.

While the community cannot control extreme weather hazards, it can influence its exposure and vulnerability.

For example, Macquarie University research centre Risk Frontiers found that 60% of homes destroyed in Marysville and Kinglake during the 2009 Victorian bushfires were located within 10 metres of bushland.

At that proximity, buildings have a 90% or higher chance of burning down in Black Saturday-style conditions, Risk Frontiers found.

ICA says loss reduction is possible by regulating property construction so that structures in bush areas are fire-resilient.

Governments should reduce development in places where disasters typically occur and mandate more resilient construction, it says.

For example, flood maps showed that many properties flooded in 2011 in Queensland and Victoria were known to be at high levels of risk.

ICA says the rising price of insurance should encourage people to move to adaptation. But government intervention to modify high prices could lead to a failure to adapt to hazards and encourage further development of flood-prone land.

The National Disaster Resilience Program should be expanded to include stormwater mitigation and drainage works, as inadequate public stormwater mitigation accounts for around a third of water damage for private property owners during large rainfall events, according to ICA.

It says federal mitigation funding will have to increase as climate change will require more complex and expensive mitigation projects.