Residents in flood risk regions are contacting media organisations to complain about insurer-enforced cover embargoes – but brokers don’t appear overly concerned.

In recent weeks ABC News has published a number of articles in relation to the issue. One story focused on a Gold Coast resident who said an embargo prevented her from renewing her home contents insurance.

Another published yesterday quoted a consumer in Wodonga, Victoria, who was “knocked back” by several insurers after trying to change her contents policy.

The article said it was an example of insurers “red-lining” a postcode – effectively withdrawing from a whole area because it’s too risky.

But Lesley Bownds, Director & Practice Principal at Wodonga-based DBK Insurance Solutions, says any restrictions by insurers are temporary.

Some postcodes have been embargoed for more than four weeks, she says, and there is no indication of when that might end.

She says insurers will generally renew cover even during an embargo, but will not make changes to cover or write cover for those currently uninsured.

While she says the area has “never had a flood embargo before” and postcode-wide embargoes don’t take into account properties that are not at risk, she also accepts the current threat makes life hard for insurers.

“They are just trying to limit their exposure,” she told insuranceNEWS.com.au.

Daniel Berry from Lismore-based Dudgeon Berry Insurance Group says the area has experienced some embargoes, but does not believe insurers have acted unreasonably.

Financial Rights Legal Centre senior policy officer Julia Davis told insuranceNEWS.com.au that lengthy postcode-wide embargoes, along with broader issues of insurance affordability and availability, are concerning.

Ms Davis argues that insurance should be considered an essential service by governments.

“At some point we need to think about an insurer of last resort, which could involve some concessions or subsidies for low income people,” she said.

“I get that it’s controversial, and insurers would say that it would disrupt the price signal.

“But if an insurer can embargo an entire postcode, that is not sending a clear price signal. How does that take into account mitigation work carried out at particular properties?

“It’s not like there is this perfectly tuned market, as insurers would want us to believe.

“People buy a house as a 30-year investment and, with insurance issues getting worse, there is no guarantee that they will be able to protect their asset for that whole time. Young people don’t understand that until it’s too late.

“Australia is a country where we support each other and we need to think outside the box.”

The Insurance Council of Australia (ICA) says reducing risk is the only way to sustainably bring down premiums.

“As has been shown in other countries, premium subsidies without complementary risk mitigation do nothing to reduce the risk of events like flooding, and can in fact remove incentives for individuals and governments to take action and increase risks to lives and property,” a spokesperson said.

The ICA says insurers consider their appetite for risk before offering policies, as well as “the type of natural disaster risks they will cover for a property in a particular location, considering the likelihood of flood, bushfire, and cyclone”.

Embargoes are used by insurers when a major event is imminent and are designed to prevent uninsured people taking out cover as a flood or fire approaches.

What are your thoughts on current flood embargoes? Email editor@insurancenews.com.au.