Insurance industry calls for $30 billion Flood Defence Fund

The Insurance Council of Australia (ICA) is calling for a major investment in flood defences to protect homes and businesses from rising risk, proposing a $30.15 billion Flood Defence Fund (FDF) over 10 years, shared between the Federal and state governments.

According to their new report titled Advancing Australia's Resilience: Policy Recommendations for the Next Australian Government, nearly 300,000 properties face a serious risk of flooding every year, a number that will only rise as extreme weather events increase in size and scope. 

What’s more is that many of these homes are not meeting modern resilience standards, leaving homeowners exposed to catastrophic damage and rising home insurance premiums. 

ICA chief executive Andrew Hall says the only way to rectify this is via public policy.

“Insurers stand ready to play their part in this important reform, but significant new government investment is the only way to reduce extreme weather risk and must underpin our future collaborative endeavours,” Hall says.  

What’s in the Flood Defence Fund?

ICA’s proposal focuses on the most flood-prone areas in Queensland, New South Wales and Victoria. Here’s what’s proposed:

• $15 billion for new flood defences including levees, flood barriers and improved drainage systems
• $5 billion to help homeowners and businesses make much-needed upgrades
• $10 billion for buy-backs and relocations for those who need to move out of high-risk zones.
• $150 million for improving older infrastructure

In other words, the plan is about shifting from a reactive approach where we wait for disaster recovery efforts after natural disaster strikes, to making communities more resilient before floods hit.

“Consumers cannot wait for mitigation and risk reduction programs to offer the critical protection and price relief needed. Immediate action is also essential – with tax and regulatory reform offering the best opportunity to ease cost pressure on insurance premiums in the near term,” Hall says.  

ICA’s Advancing Australia’s Resilience policy paper also pushes for better flood mapping and land-use planning, stronger home protections in cyclone-prone areas, reforming state-based insurance taxes, and targeted support to help small businesses, not-for-profits and strata communities reduce risk.

What happens next?

Hall says the next move is up to policymakers, and he hopes the new paper will be the wake-up call they need to finally act.

“We know there is no silver bullet. However, if we don’t do anything, insurance customers, governments and taxpayers will continue to pick up the much higher costs of rebuilding every time there is a natural disaster and insurance risks becoming unavailable and affordable for those Australians who need protection the most,” Hall warns.

What you can do to keep your premiums in check

If you live in a high-risk flood zone, there are many factors outside of your control, like where you live. But there are plenty of levers you can pull to potentially nudge those premiums down. 

Here are some tips:

• Flood-proof your home. Having small risk-prevention measures in place - like better drainage, water-resistant materials or raised electrical outlets - can not only reduce flood risk, but also give your insurer a convincing reason to shave some $$ off of your premium. 
• Increase your excess. Agreeing to a higher excess will usually help reduce your monthly premiums. Just be aware that a higher excess means you’ll have to pay more for any claims.
• Check for discounts. In addition to the flood-proofing discounts we already mentioned, many insurers offer other types of discounts including a discount on your first-year’s premium on new policies, or multi-policy discounts (for example, bundling home insurance and car insurance).  
• Compare options. Insurers price risk differently, so by comparing options, you could uncover some easy savings.

With that in mind, here are some of our favourite policies out there.