Consumer group the Financial Rights Legal Centre says Allianz’s planned changes to residential flood insurance represent “another step away” from providing the cover Australians need.

Under the changes revealed last week, the insurer's existing customers in high-risk areas who have no flood cover can continue without it. However, its flood exclusion will extend to rainwater run-off, in addition to the standard definition of flood.

The insurer decided on the changes after reviewing its householder products in response to the 2022 floods, and specifically whether it was viable to continue offering optional flood cover.

As part of the revamp, flood will be included as standard cover for new customers taking up home building, contents and landlord policies from late this year. New policyholders will no longer be able to opt out of flood.

“Those who opted out of flood cover with Allianz were previously eligible for rainwater run-off cover, meaning they would be covered in some circumstances for some or all of the damage,” the legal centre’s CEO Karen Cox told insuranceNEWS.com.au.

“Now they will have no cover from any type of rain event. Sadly, this is likely to have most impact on the people who can least afford it – those who have been allowed to build or buy property in high-risk areas.”

Allianz says the changes will speed the claims assessment and decision-making process because there will no longer be a need for hydrology reports to assess flood damage claims.

The insurer had to commission more than 1000 hydrology reports after the 2022 floods.

“In addition to a significant cost, this resulted in long delays due to the demand and supply imbalance for hydrology services,” a spokesperson said. “For Allianz’s existing home insurance customers who continue to not have flood cover, the extension of their flood exclusion to exclude rainwater run-off, in addition to riverine flooding, will negate the need for hydrology reports to distinguish between riverine flooding and rainwater run-off.

“This approach will avoid the delays created by the need for hydrology reports, resulting in quicker decision-making and improved clarity of coverage for policyholders.”

Ms Cox says removing hydrology reports will benefit some consumers for the reasons the insurer suggests, but overall, the changes are “another step away” from the protection people need.

“Giving policyholders some cover for flood is preferable to no cover at all, but [this] will increase the number of people effectively priced out of insurance for a key risk and put an unfair proportion of the cost of managing our changing climate on random individual households.”