The Insurance Council's flood insurance project

• Following on from the considerable research and work undertaken by the general
insurance industry on the issue of flood mitigation and management, the Insurance
Council Board endorsed an approach for the industry to pursue a framework which will
lead to flood coverage becoming available for nearly all households in Australia.
• The industry has also reaffirmed its commitment to working in partnership with
Governments to address the issues of flood mitigation and management, noting that
flood remains a significant community issue that stands to worsen with the various
inundation predictions arising from current climate change models.
• The Insurance Council believes a partnership approach with Government and the
general insurance industry is needed to find ways in which community understanding of
flood risk and its management can be increased. This includes flood insurance being
made more widely available when the risk of flooding is reduced to an acceptable level
through mitigation measures.
• To reduce consumer confusion, the general insurance industry worked to develop a
voluntary common definition for inland flood. It is envisaged that this definition of flood
would be adopted on a voluntary basis by individual insurers; i.e. – insurers would remain
free to offer coverage to alternative definitions for flood, with consumers able to use the
voluntary common definition as a reference point for comparison of the product actually
being offered.
• The primary obstacle to achieving greater market availability of flood cover for the
majority of households, is the ability for insurers to understand and price the risk.
NFID – National Flood Information Database
• Development and maintenance of flood maps and how they impact upon the built
environment is a role typically left to local government authorities and/or floodplain
management authorities in each of the states.
• In some instances there are highly accurate flood maps made available to the community
and industry, upon which reasonable risk decisions can be made. In other instances no
flood mapping is or can be made available, leaving a situation where local communities
and insurers are unsure of the extent of the risk.
• The general insurance industry is preparing a national property database using available
government flood studies, provided by each respective State.
• This database will be employed by Insurance Council members to test the risk applicable
to an insured’s property and then to offer flood cover if the risk is within the insurers own
calibrated limits.
• Apart from engendering a knowledge environment where the predicted risk to all flood
prone homes will be able to be understood, quantified and priced according to individual
underwriting tastes, the industry will also be in a position to work closely with government
on those areas collectively identified as being at extreme peril and beyond the risk
appetite of the market.
• A key ingredient for the success of this project is the availability of and access to all
current flood mapping, in all its diverse forms presently held by government agencies.