Flood
cover rises to unaffordable levels
Thousands
of Australians are facing soaring insurance premiums for flood cover,
forcing many to ditch protection even as the risk of extreme weather
increases.
SMH,
17
February, 2013
Insurers
blame the increases on the spate of flooding across much of eastern
Australia in recent years - with another $733 million hit to insurers
from January's big wet in Queensland and NSW - as well as
improvements in flood mapping.
For
Tina Taylor, the premium increase is steep for her hobby farm on the
bank of the Colo River, a tributary of the flood-prone Hawkesbury
River.
When
insurer NRMA recently quadrupled her premium from $2000 to $8250, she
was forced to drop flood cover. Other flood policyholders have faced
increases of 500 per cent.
"People
are prepared to pay a reasonable amount for insurance but, when the
cost is unrealistic, you just go without," Mrs Taylor said.
For
others, the increase is harder to fathom. One resident of Seven Hills
in Sydney’s west, was told by NRMA that her annual premium would
more than triple to $3600 even though the council rates her house as
having less than a one-in-10,000 year risk of flooding.
Big
wets to blame
Insurers
blame the increases on the spate of flooding across much of eastern
Australia in recent years including a $2.5 billion billion bill for
the 2011 Queensland floods – with another $733 million hit from
January’s big wet in Queensland and NSW.
The
chief executive of the Insurance Council of Australia, Rob Whelan,
said premiums financed claims and, if claims went up, companies
needed to increase premiums. "Price signals are incredibly
important as to the level of their risk.''
Insurers
also say the creation of a National Flood Insurance Database has
improved their ability to assess hazards.
“In
some cases, we may have updated our flood mapping or are now able to
better identify a property’s exact location on a block,” Andy
Cornish, chief executive of NRMA, explaining the premium hikes.
Mr
Whelan said 2 per cent of Australian homes are at “extreme risk”
from flooding. The industry knows where they are and will price
accordingly – even if that makes policies unaffordable.
Grafton
narrowly avoided flooding last month when its 17 kilometres of levees
just held.
"Nobody
near the [Clarence River] or the levee has flood insurance," the
mayor of Clarence Valley Council, Richie Williamson, said. "Insurance
is a very real issue" with annual premiums costing as much as
$10,000, he said.
Mitigating
circumstances
The
issue of those most needing flood insurance being unable to pay for
it may come to a head next month when the federal government is due
to respond to the Productivity Commission’s report on barriers to
effective climate change adaptation.
Catastrophes
cost insurers almost $10 billion in the five years to 2012, triple
the previous five years’ level, and are expected to climb as a
warming atmosphere makes intense rainfall events more likely, climate
scientists say.
Flood
mitigation efforts may focus on regions such as the Nepean-Hawkesbury
valley. It is “potentially one of the most at-risk areas from
flooding in Australia,” according to ICA’s Mr Whelan.
John
Miller, the 83 year-old spokesman of the local flood mitigation
action committee, has campaigned for decades to have the wall of the
Warragamba Dam raised 23 metres, as outlined in a 1995 environmental
impact study.
The
contruction cost, now about $500 million, should be weighed against
exposing at least 56,000 homes flooding in the event of a repeat of
the monster flood of 1867.
A
flood that size would cost “far more than Queensland has ever
seen,” he said. “We’re trying to get the money before the
flood."
Flood
way
On
McGrath Road at McGrath's Hill just south of Windsor, houses must be
built to two storeys. Even so premiums for some houses have increased
six-fold in the past year from $1200 to $8000.
Barbara
Harris, a nearby resident has a particular reason to worry about
floods.
Her
insurer, NRMA, recently hiked the annual cost of her premium
including flood coverage from $840 to $4800, forcing her to drop
protection from inundation. One friend was offered flood coverage for
$10,000 a year.
“Most
people can’t afford insurance,” Ms Harris said. “It’s beyond
anybody’s pocket.”
At
a height of 16 metres above the nearby South Creek, the base of Ms
Harris’s house is roughly at the one-in-100 year flood level.
However, Ms Harris says earthworks by neighbours and nearby road
construction mean her horse paddocks and buildings are at greater
risk – just as insurance is being priced out of her reach.
“It’s
definitely more vulnerable,” she said. “If we do get a big flood,
we’ll be gone.”
Ms
Harris, who uncle Bill Harris was an engineer on the giant Warragamba
Dam during its construction more than 50 years ago, said she has
little choice but to stay put and hope the 21-year abeyance of major
flooding of the Hawkesbury River continues.
“If
the floods come, nobody is going to want to buy there,” she said.
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