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Australian insurers call for better flood mapping

Sydney, Australia: The Insurance Council of Australia urged for better flood mapping, extensive mitigation work and state-funded subsidies for extreme risk insurance policies as the best plan to protect home owners and councils against costly catastrophic events.
The call for a multi-faceted approach comes as a government review into the unaffordable and unavailable nature of natural disaster insurance received final submissions before reporting its findings in late September.
The review, headed by former Australian Prudential Regulation Authority member John Trowbridge, proposed the use of a national funding pool to allocate subsidies — which will be paid by taxpayers, insurers or councils — and help fund premiums for high-risk properties. It also suggests two models to address the affordability of flood cover. They include a “full flood” model where cover would be included as a mandatory part of home insurance, and an opt-out model where cover would be offered but home owners could choose whether or not to take it.
But actuaries and the insurance industry say the problem lies not in a lack of cover, but in the industry’s inability to price risk accordingly in flood-prone areas because of a lack of flood mapping data and state-funded mitigation programs. “Insurance is not the answer to this — it doesn’t provide a long-term solution to the problems created by natural disasters,” said Daniel Smith, convenor of the Institute of Actuaries Natural Disasters Committee.
“The first thing you should do is avoid the risk but if you can’t afford it, you mitigate the risk. Insurance comes when those options fail.”
The Insurance Council of Australia has questioned the direction of the review, while underlining its belief that governments and local councils need to funnel more funds into mitigate efforts.
“Mitigation has taken a back seat because it’s the hardest and most difficult thing to implement and it will ultimately be expensive. But it’s also the most important,” ICA chief executive Robert Whelan said. He argues that by mitigating risk, insurers are able to better price and reduce the cost of insurance to home owners.
Source:The Australian