Mel and Tony own a home in Deagon on Brisbane’s north side. It’s a quiet community on one of Brisbane’s many meandering creeks. While this creek offers pretty views and plenty of good fishing and crabbing spots, it is also the source of anxiety for Mel and Tony. While they’ve never experienced flooding, many of their neighbours have not been so lucky. This month, their annual insurance bill leapt to $9000 – more than a 60% increase on the previous year. They’ve never had a flood, or even made an insurance claim.

Deagon, like many of Brisbane’s suburbs has had a tough few years with floods causing extensive damage several times since 2011. Residents have scrambled to put flood mitigation measures in place, including extensive and expensive building works, including raising homes. Instead of rewarding this kind of capital investment, insurers continue to raise premiums annually.

“I’ve been a plumber for three decades and never seen work like this before. We’re engineering backyard drainage systems with multiple pipelines and pump systems to keep homes safe, and yet the home owners are essentially being punished for reducing the insurer’s risk” said John Salmon, a veteran plumber in north Brisbane.

The United States Model

The United States National Flood Insurance Program, run by FEMA allows for homeowners to reduce insurance premiums by taking measures to reduce risk. As part of their community rating system, homeowners can get a certificate for work done to mitigate risks, and then apply this certificate to get discounted insurance. This includes elevating appliances, sealing basement windows and creating water diversion strategies.

According to the Insurance Council of Australia, flood insurance here is calculated almost exclusively on the National Flood Information Database, building types and previous claims, leaving it up to individual insurance companies to apply extra criteria if they choose. Unfortunately, the extra criteria usually result in higher premiums, not lower.

Calls for Insurance Industry Action Still Ignored

In their 2020 report, the Actuaries Institute made recommendations for drastically reducing flood insurance premiums to relieve government spending and ensure homeowners could obtain ongoing protection. The report suggested a more robust system of risk analysis is needed if insurance premiums are to reduce to affordable levels.

“Risk reduction: Mitigating or avoiding flood risks will naturally lower flood insurance premiums. This is the only approach which reduces (rather than shifts) the cost, together with the indirect financial and social costs of these disasters experienced by individuals, communities, and society.”