flood insurance

Covering the climate odds: IAG adds flooding to its core insurance
Author: DANNY JOHN
Dated: October 12, 2009
Link: http://www.theage.com.au/business/covering-the-climate-odds-iag-adds-flooding-to-its-core-insurance-20091011-gsda.html


AS IT faces a fight on two fronts with its rival insurers and against the threat of climate change, Insurance Australia Group has started to make flood cover an automatic part of its customers' policies.

The first areas to benefit are NSW, Tasmania and the ACT. The cover remains an option in South Australia and Western Australia.

IAG hopes to introduce flood insurance in Victoria and Queensland once it has the necessary information to show which customers are most at risk.

News of the change was quietly disclosed in IAG's annual report last month.

About 98 per cent of IAG's existing and new customers in the first regions to get the cover are automatically included. But the remaining 2 per cent, those considered to be in high-risk areas, will have to pay higher premiums.

This payment will reflect how likely and how seriously their homes and property could be affected by floods, said Andy Cornish, the recently appointed head of the company's Australian operations.

The changes for existing customers started to take affect in August and follows a concerted advertising push by its big rival the Suncorp-owned GIO, whose flood cover pre-dates that of IAG's.

Customers are being given the choice of whether to pay the higher premiums or to stick with their existing cover and take the chance that they will not be hit by a flood.

But the insurers are also warning that there is a trend for an increasing frequency and severity of major weather events such as floods - a factor being linked directly to climate change.

According to the latest insurance analysis provided by Macquarie Equities Research, a 25 per cent increase in heavy rain over 30 minutes increases the risk of a one-in-100 year flood to just one-in-17 years.

And an increase of one degree in average summer temperatures raises the chance of more bushfires between 17 per cent and 28 per cent.

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Comment:

Are insurance companies are starting to make flood cover an automatic part of policies ?

Read as all BOLD PRINT: "But the remaining 2 per cent, those considered to be in high-risk areas, will have to pay higher premiums."


Many being offered these "premiums" questioning whether assessments actually relate to their flood and/or tidal and/or bush fire risks, or are just mass calculations by postcode...


Some question whether spreading these risks wider could make these policies affordable with risks well covered, better covered, with more covered.


Insurance can be expensive, however are costs reasonable and rational ?

For some communities it may be cheaper IF they were required - and compensated, to be moved by legislation.