I'm not part of the insurance industry, but I can understand to some degree their reticence in relation to flood insurance. The essence of insurance is that you pay a relatively small annual fee that provided cover against a low probability but costly and catastrophic damage that might be caused by some event.

Arguably bush fires are in that category. However, it is clear that flood damage is in a different category. Let me state it plainly. If you build your house in a flood plain, below the level of recorded floods, then it is CERTAIN that sooner or later your house will be flooded. Insurers are not in business to insure people who take decisions that will certainly expose them to expensive damage.

The expectation that either the insurance industry or the government will look after us in the event we suffer a loss is another example of the way that the welfare state has intruded our lives and created an attitude of entitlement in many people.

People who own a house below the flood level cannot argue that they didn't know. During conveyancing, they would surely find out about flood risk. They have had the benefit of living in a lovely riverine environment but don't accept the inevitable consequences of doing so. The only answer is that they must self-insure. If they can't afford that, they shouldn't be living there. Tough. But why should the rest of us be required to pay for their folly?

I would venture that most insurers will happily offer cover if they think a market exists - by this I mean potential insureds prepared to pay what the insurer calculates to be the necessary price for them to provide certainty of cover.

Subsidising the cost of doing so by way of public expenditure is risk shifting so should be analysed on that basis.

Governments and charities are already paying significant amounts to support people affected by the floods so in a sense the risk shifting is already occurring.

Is that a bad thing? Perhaps not but Herbert Stencil's point about risk awareness is pretty important when it comes down to public support of people's private decisions.

Well said Herbert. I am certainly getting very sick of this creeping socialist/communist attitude that is taking over the country, led by ideas like this.

When I bought a river front property I made sure the house was high enough to be flood free. I had to buy a smaller property than I would have liked, to be able to do this, as flood free commands a premium. I could have bought a larger, lower property, & taken the chance, particularly if the government, or the insurance industry is going to reimburse me for my bad choice, when the inevitable occurs.

When a major Qld financial institution raised my house & contents insurance premium by 25% then 32% in consecutive years, they claimed it was to allow them to include flood cover on all policies. The new premiums were higher than I could really afford.

I told them I did not want flood, but they effectively said tough. They have since called me 4 times wanting to know how they can get my business back. I effectively have said tough. I don't need, nor will I pay for flood insurance just to cover the dills.

I am also against disaster relief. It a most unfair way of doing things. If your house burns down due to an electrical fault, tough. If the fire spreads, & a couple of hundred burn down, great. The government will declare a disaster, & pay out heaps of "relief".

When I went off into the pacific in my yacht, I found foreign waters insurance was 7% of the value of the yacht. Fair enough, quite a few are lost out there, but I could not afford that much out of my budget.

I backed myself to navigate well, & did not insure. 8 years later, I toasted myself in in congratulations, I had saved 56% of the value of my yacht, by not insuring. If necessary I would not insure my house if I effectively had to pay a levy I can't afford to cover the dills.

There is a way that the insurance industry might cover risk of flooding for those who have houses built on flood plains under known flood levels.

1. Government (or councils) should ensure that the information on past flood levels is widely promulgated so that everybody knows whether their house/property might be exposed to floods. That is, flood maps should be provided.

2. The Conveyancing process/purchase contracts should require the vendor to state whether the property is prone to floods or has ever been flooded in a riverine flood. The purchaser should be required to sign an acknowledgement that he is aware of the flood risk.

3. Those owning houses/property in flood prone areas across the country should be required to take out flood insurance with a specialist flood insurance group set up for the purpose.

4. There are many many flood prone rivers around the country, and it is likely that only a very few of those will be flooded in any one year. Further, as we saw in Brisbane, the last serious flood was 35 years ago. This means that the insurers can collect premiums across the country and possibly for many years, and build up reserves to insure those exposed.

This sort of approach may require government intervention in some way, for example legislating process to ensure that all flood prone properties take out insurance.

Those who prefer to take out self-insurance can "opt out" but only by signing a contract that acknowledges that they are taking that risk themselves.

Last year when I bought a house we ensured we were on 'high ground' in the event of a flood.

Our insurer, it would appear is the same that Hasbeen rejected, as apparently it is the only one that covers for flood no matter the cause as standard. It even covers tsunami but not coastal erosion. The premium was not as expensive as the one offered by our bank and much cheaper than the logo displayed at the SCG and other insurers.

The floods came and we were surrounded by the mighty Fitzroy River and we watched the 'swampies' stoically go under: "we were flooded in '54 and '92 and survived, so we will rebuild" and no doubt get flooded again.

To my surprise when I recently got my insurance renewal expecting a significant increase to socialise the losses, the premium had actually reduced by a significant amount.

So a revised inventory was done of the contents and the difference used to increase our cover.

I agree with the creeping socialist sentiment but would stop short at the communist paranoia. An example was made during the GFC where institutions deemed too big to fail were given carte blanche to socialise losses while privatising profits. This perversion of capitalism has set the precedent.

We donated to the flood relief but put a stop to it as soon as the flood levy hit. The socialists have all this money we donated but are yet to allocate it all. And now they are taking more. While it is not significant in our scheme of things it still irks.

Herbert Stencil, your proposals are way too sensible and practical to be of any use to those who's experience of floods consist of crocodile tears flowing through the halls of Canberra.

Gerard, this business about flood insurance has been kicked around quite a bit and its time to update yourself with the arguements.

The insurance companies are not there to perform community service.
If you wish those who live in flood plains to be subsidised when they are inevitably flooded out once every 20 or 50 years or whatever, then you must direct your appeal to the government, not to private companies.

As the other posters have pointed out, to expect the insurance companies to pick up the tab for the choices made by consumers is unfair. In Australia, you can get flood insurance only where you don't need it. Those who will, inevitably, be flooded out can't get it for the good reason that it is entirely unprofitable to offer it. That has always been the case in Australia, and the same point has been made over many floods now. Time to update.

...Pompous statements of condemnation aimed at flood victims of the Queensland floods and cyclones such as made here by Hasbeen, are indicative of the ignorance to the facts of many Australians that surround the suffering caused to the victims of these natural disasters, which will and do occur, and ignore facts as pointed out succinctly by Brody in this article, that in particular, 15% of claims for flood damage redress were declined by the insurance companies on technical grounds centred on the nature of the flood itself. Hasbeen is typical in his criticisms of victims of the floods for not insuring their properties, (but yet recommends as an austerity measure, people not insure their properties and shoulder their own risk as he himself did with his yacht).

...Again, that woolly thinking belies another reality, that of legal obligation of the mortgagor by the mortgagee to insure the asset of the home; That fact alone forces many insurers to take cheap options offered by insurance companies; companies who too often hide the true detail of deficiencies in their policies in small print; (enter the 15% rejection of claims).

...If more people, (as I and many others did when the chips were down), raised their winging fat arses from a comfortable lounge chair to participate in reconstruction efforts, the ignorance of such matters would be reduced. Thankfully, many generous Australians, without hesitation, contributed to their fellow Australians with money, time and personal effort to assist families overcome personal tragedy in reconstruction efforts in places such as Ipswich, and I am hugely buoyed by all the people I met doing just that

if insurance companies are forced to cover natural disasters that we know in advance are going to occur, then we will all have to pay higher premiums.

All properties in Brisbane that were recently flooded, were also flooded in 1974 & 1893. some were also flooded on other ocasions repeatedly.

in these circumstances the insurance companies should also be able to sue the corrupt &/or incompetent bureaucrooks, politicians who insist on allowing building, construction on flood plain land, especially when higher land is available.

The horror of Grantham is an excellent example of this.

diver dan

Take another look (or a first look) at the arguments. The 15 per cent rejected, were most likely rejected on the grounds that their policy did not cover riverine flood. River floods were excluded because the building stood in a flood plain, and would therefore be expected to flooded out at some point. You cannot insure against a certain event.

The media at the time reported this as if the distinction between river floods and floods from storms was in some way new, and some sort of technical escape clause for insurance companies. Hence the author's confusion. In fact, its always been that way, and it is not a fine or idle distinction. Houses built in flood plains cannot expect to get river flood coverage, and never have been able to get it. To complain that people are whinging when they are simply pointing out the blindingly obvious is absurd.

If you want to give them assistance then it is a matter for the government, or perhaps voluntary work, not insurance companies.

Formersnag,

Insurance companies all do their own risk analysis to varying degrees.

For example, my insurance company does risk assessment to the street number level. They also cap their liabilities with reinsurance.

Another insurance company may only assess to postcode level or street level and will not insure certain events despite the risk being neglible in perhaps most of that postcode. They choose to limit their business but reduce the risk assessment burden.

All insurance companies would be aware of the flood maps and hydrology reports. It is public information.

In my area some of the affected houses have been there since the turn of last century but most were built during the 2nd world war and to my knowledge council hasn't issued new building permits in flood affected areas for two decades.

That insurance companies choose to insure houses in known risk event areas is the risk they accept in exchange for a premium. They are betting on that risk event not occuring.

Should they get that wrong they have but themselves to blame.

Nevertheless the point around councils continuing to approve construction in known risk areas is valid if it is still occuring.

Neutral, I think that insurer I rejected may be the ones who's logo you mentioned. Perhaps they have lost so much business they have reduced their prices. I found cover at just over half their price.

I have a difficulty with insurance as many will not insure you if you are not on town water. Many others will not do so if your land exceeds 2 hectors. I am guilty of both sins.

If I can be excluded by these factors, admittedly caused by my own choosing, why should purchasers of flood prone properties, obviously a greater danger than mine, & of their own choosing, be not so excluded?

Diver, you probably aren't interested to know I was born on the 29TH of February. Yes Leap year. I only get a birthday every 4 years. I went for 12 years without a birthday celebration, even a beer, because in 76 & 80 on the 29Th I was in the middle of a cyclone. I only noticed I'd missed my birthday a day or two later.

In one it was just me & my boat, & the Solomon sea, & birthdays were the least of my worries.

In the other, after fetching a number of people in danger which developed about 40 hours faster than the bureau had advised, I was then responsible for the safety of 32 people.

When it was over, I was the one suffering loss, which I could have reduced if I had looked to my own situation first, rather than the safety of others.

I gather you have helped after the event, & that's great, but you do have a tendency to go off without the facts mate. I have nothing against those who stay in flood prone areas, in fact I recognise their difficulty, after the event, & actually admire them. I have also been invilved in a few cyclone clean up efforts, & feel for them, particularly the single elderly, however I'm not prepared to subsidise them, as I don't ask you to subsidise me.

Hasbeen,

The logo required me to fit through a very small hoop at a very exhorbitant price so I doubt they have reduced their margins. The insurer I am with has a sunny disposition and is also a major QLD financial institution.

I keep forgetting from 20+ years in Sydney that the SCG logo did not originate there.

I had my car insurance with the logo but recently changed that to a cheaper policy sold via a supermarket with business links to coal mines and hardware chains in protest at their unwillingness to insure my house under reasonable terms.

Next year I will probably change again to take advantage of the 3 policy bulk discount the sunny side offers.

That's business.

Cyclone insurance with only 1 percent knockback - I doubt it.

Up here in the area most affected by Yasi a common story is of insurance companies knocking back damage on the claim it is 'due to lack of maintenance', or people being offered a pittance in 'exgratia' payments that go nowhere near the cost of repairs. They might be able to split hairs over the definition of flood but they still had difficulty admitting that we had a cat5 cyclone.

I also dispute Neutral's understanding that money from the premier's appeal is not being handed out. Money is being handed out, with a very targeted and thoughtful plan. I am very happy even though we got only a small amount.

If not for Anna Bligh, the insurance companies would have had a far greater decline rate. When putting in for the premier's appeal as many were encouraged to do, as insurance companies were declining all over the place, we had to give permission for the Premier's Dept to contact our insurers on our behalf.

God bless Anna and her staff as our insurer's staff told us that they were putting the pressure on them to do the right thing.

A property built on the Brisbane river is usually worth up tp ten times that of a suburban property.

So, if the owners of these properties expect us to prop up their asset, then may i suggest we get a slice of the profits when they sell.

Of cause I doubt they will agree to this, but it would only be fair don't you think.

Aka, I challenge your understanding of what I said. Review what I did say and perhaps that may explain why you "got only a small amount".

What I wouldn't dispute is insurance companies propensity to use legalistic and technical pedantry down to the nth degree to avoid legal and moral responsibility.

There is no mystery about insurance. Just a lot of misunderstanding.

>>Insurers are not in business to insure people who take decisions that will certainly expose them to expensive damage<<

They most certainly are, Herbert Stencil.

But only if there is a buck in it for them.

Otherwise, how do you explain earthquake insurance... in California?

http://www.quakeinsurance.net/

The science of calculating risk is highly developed, and is the fundamental building block of the insurance industry, which essentially works as follows: you calculate the risk of having to pay out $x, and calculate the premium that you charge as $x plus fifteen percent. You average this out over the population you intend to insure, and voilà, you have an insurance business.

If payouts are likely to exceed premium income, you raise the premium. If people try to rort the system (yes, some do...) by claiming damage that occurred outside the scope of the policy, you resist - to do otherwise would be to penalize those who play by the system.

Looked at in its very simplest form, you are playing the pokies. You know that the payout is fixed - in this example, it is 85% - but you play anyway.

Insurance is not rocket science. Nor is it a charitable source of funds doled out by kindly souls with a sympathetic tear in the corner of their eye.

It is a business. And the challenge of "working harder to ensure flood cover for all" is simply met: raise the premiums for all.

...You mean to say your part human Hasbeen; Go tell the people in Ipswich how great and compassionate the Insurance companies were to them. Bit of advice; you may need a baseball bat if you want to escape alive!

http://forum.onlineopinion.com.au/thread.asp?article=12477#215772

Neutral, another similar issue is the Victorian bushfires which were also worsened by RED/green loony left land use policies at both local & state level, which radically increased the fuel loads.

Another contributing factor was poor maintainance of power lines, also produced by poor government policy.

Yes snag, I'll bet there are a lot more clearing a sensible area around their houses down there now.

The fool councils or environment departments wouldn't dare to take people to court for doing so, now & for a few years. The public would have their guts for garters if they tried.

It's a real pity that so many have to suffer because of governments not doing their jobs.

The insurance company is not to blame for people not being covered for the flood that occurred this year. For starters much of the responsibility for flooding rests with the Government and those it appointed to manage the dam. Next, the responsibility rests with those who knowingly purchased in areas flooded in 1974 (and since then )and who benefited by paying lower prices for their property for this reason. Why would they then expect a well managed insurance company to cover them for a flood similar to that of 1974? Lastly, buyers of any policy are expected to read the fine print and ask questions if they cannot understand the fine print. It is really their own fault if they are too busy to be bothered until after an event.
Instead of complaining, they should be grateful that people donated money and time to help them clean up. And if they have a gripe because they had no idea they were in a flood zone, they should sue the conveyancing solicitor who should have told them (or is it that they too tight to pay for this search?)
Each flood affected person knows where they stand on this. It is just easy and too simplistic to blame the insurance companies.
And before you reach for the knife - Yes , we were affected by the flood and Yes, we knew the possibility existed for a repeat of 1974 because we know Government and bureaucrats cannot be trusted.