Floods lift insurance bill $5000
WHEN Lyn Usher opened her insurance bill she was shocked to find her premium had increased by more than $5000 per year.
The cause of the sudden increase in Ms Usher's flood cover premium was the Southgate area's flood-risk rating being reclassified from one-in-100 years to one-in-20 years.
Ms Usher was previously with GIO but she switched her cover to Commonwealth Bank Insurance and dropped the flood component.
A GIO spokesman said the company only offered complete cover and it would not be possible to get selective insurance from them.
He said GIO's partner company Suncorp did offer cover without a flood component.
"GIO insurance has always offered a complete product and that's why some GIO customers would be encountering things like that," he said.
The GIO spokesman explained many areas in Australia are now considered more vulnerable to floods for insurance purposes in the wake of flood events earlier this year.
He said many parts of the Clarence Valley were re-listed as a one-in-20-year flood risk, not one-in-100 as they were previously.
The situation left Ms Usher without flood insurance; something many homeowners in the Valley are familiar with.
The Federal Productivity Commission was asked to investigate this problem following the Queensland floods of 2010 and 2011.
Initially the Commission tried to respond to the public outcry when many people whose homes were flooded found they were not insured. It looked into making flood insurance a compulsory component of all home-and-contents policies.
However a spokesman from the Insurance Council of Australia said this would be detrimental for communities like the Clarence Valley, which are known to be flood prone.
He said it would mean people like Ms Usher would end up with no insurance because the cost of flood insurance would make cover unaffordable.
A spokesman from the Federal Productivity Commission said there were other ways premiums could be reduced.
The report found state and territory taxes and levies were unfairly making insurance more expensive than it should be.
But the report also found subsi- dising insurance costs for people like Ms Usher would mean as a nation we are unlikely to "adapt" to climate change. The argument is living in flood-affected areas will not be economically viable if the number of floods increases.
- The Productivity Commission said the Federal Government should not subsidise flood cover.
- The Insurance Council of Australia said making flood cover compulsory would make home and content insurance unaffordable.
- Many people in flood-prone areas no longer have flood insurance.