This is why we have a problem.
Some issues need to a resolution not a perfect solution. While all interested lobby groups debate the situation for decades the problem persists. It is governments job to set policy and as such they should set the definitions for flood and the insures can work within that frame work. The key is for the insured to know what they are getting and if that's no flood insurance so be it.

In the “final wash”, the obvious omission from debate on the issue of flood insurance is not the argument whether a property is covered for the varying types of originating causes for the flood or not, but the more critical element or question is “who should own the responsibility for insuring the property in the first instance”.

Presently the purchaser of the property (the mortgagor) has a responsibility to the financier of the property (the mortgagee) to insure the property; together with the incidental agreement, to maintain the property in reasonable order.

It is within my scope of understanding that if the mortgagee (the bank for instance), has the potential to lose the ability to reclaim their asset (money invested in the mortgage), if the asset mortgaged is destroyed or lost value due to catastrophe of fire or flood, for example, why is the mortgagor responsible for insuring the property at all? Surely the mortgagee (bank) has a responsibility to insure the risk to their own asset, at least to the value of their investment.

The clarifying of this point would minimise the devastation caused by non-insured property owners still holding a liability to repay a mortgage following the total loss to property not insured, or not sufficiently insured, but remaining encumbered with a loan repayment liability to the mortgagee. The current situation precludes the option to victims of flood, to walk away free of the loan repayment commitments and simply start from scratch to rehouse themselves and their families, and abandon dangerous and flood prone areas altogether

What should be classified as flood prone, 2 meters above sea level or 6 meters above sea level. There's no set rules for a flood.
Brisbane is always going to be in the flood prone stakes, with a dam in the area. Floods and drought will come more common.
It's one thing to make rules for insurance companys and another to get them to take up the offer. If you make payouts to common you won't be offered insurance. Easy as that.

The definitions are clearly the key. My (admittedly amateur) view is that the definition submitted to the ACCC specifically excludes rivers engorged with water that approach or exceed historical flood levels.

And perhaps that is as it should be. Who among us would offer to insure the replacement cost of a house built on a river bank, perhaps 3m below recorded 1974 flood levels. The owner of that house knows (or should know) that once in every twenty, thirty or forty years, the river will flood and his house will be inundated. That is a certainty. Insurance is NOT about covering certain risks.

There may be ways to develop insurance cover for such properties. For example, if a) all flood prone properties (ie those built below known flood levels) in Australia participated and b) there was some recognition that the intervals between floods may be twenty years or more, then there may be an insurance product that can be offered at an attractive price.

diver dan, you raise an interesting point - but (to my admittedly limited understanding) a flawed one.

When you take out a mortgage to buy a house, the house becomes your asset, the debt becomes your liability. The bank does not acquire an asset - after all, you hold the title on your property. If you have a guarantor on a personal loan, the bank does not take out a life insurance policy on that guarantor. If the guarantor dies and you default on your loan, the bank may seek recompense out of the guarantor's estate.

Similarly, if your house floods, it is your asset - not the bank's - that loses value. You are, in a simplistic sence, the bank's asset, and your value to the bank remains unchanged. You still owe the same amount of money, and the bank has the same earning potential from you. It is you, and your finances, that need to be covered from the bank's point of view. Whether you repay the bank through the sale of your house or through another means is immaterial. The house simply stands there as an assurance that, if your life goes down the drain, the bank's business won't go down the drain as well.

There must be differences between states. You build a house here and you don't get the title until all money has been paid back. You cannot get a mortgage without full insurance. If you find you cannot pay anymore you give the keys back to the bank, the bank then resells the house and you get anything over the market value of the house.
If you want to sell your house before it is paid for, that,s ok but the loan stands.