The industry has long campaigned for action to prevent building on floodplains, and there was progress last week as one state brought in new rules. 

As reported, the Insurance Council of Australia has welcomed Victoria’s mandatory flood risk rating system that dictates planning and building controls, arguing it could help improve affordability.

But what do brokers think? insuranceNEWS.com.au spoke to Tracy Donaldson, branch manager at McLardy McShane Mildura.

Tracy Donaldson

Will the proposed system work?

I’d like to think so, but the flood mapping itself from the insurers is questionable. In this town, we have a river that is prone to flooding.

In 2021, we had a flood event that really didn’t impact. There weren’t a lot of claims but there were properties that came close to flooding. And we’ve now been deemed a flood zone.

If we’re going to map correctly, we need to have ... categories where if you’re an extreme risk – which is obviously anyone who has built along our river – you’re extreme. But if you’re nowhere near the river, insurers can’t ask for the same premiums as a person who lives on the river.

But that’s what they’re doing. They’re mapping and seeing a little man-made lake and saying, “There’s some water there – flood zone.” Our local golf course has a little waterway that’s been man-made.

What other factors are affecting flood rating?

We had a heavy rain event many years ago and the gutters didn’t cope with the amount of water. So they overflowed and a lot of properties were damaged.

But it’s not a flood zone, it was just one of those heavy rain events that can happen. Now the homes in Walnut Avenue are deemed to be flood-impacted and they’re not.

We can’t just have someone Googling a property and saying, “Look there’s a bit of water there, that’s going to be a flood.” The biggest flood we ever had here was in 1956 and we’ve never had a flood that big again.

What is the impact on premiums?

Ms Donaldson says flood risk premiums are often triple those for other properties, and insurers may have embargoes that prevent someone adding cover if a flood threat looms.

She says one client was being quoted “ridiculous” figures of up to $20,000 for home cover in what she considers a safe area. The client eventually secured a policy for $3800, but only after “lots of toing and froing” with the insurer, which tried to raise the price to $8000, claiming an online quote was too low. It then backed down.

“House and contents isn’t cheap, even when you’re not in a flood zone, but it’s becoming unaffordable for people that are near any kind of water.”

How important is it that we stop building in flood-prone zones, and are levees an answer?

Very important. You see ... towns that have flooded and then flooded again, and we keep just building on the same area.

I fully agree with insurers that you don’t want to be building back in a place that’s a flood zone and then asking people to pay $35,000 for their house and contents insurance. You can’t do that.

Mildura is not a flash flood area like some locations across Australia. You know the flood is coming, there’s an expanse of water coming down the river, and so we can prepare for that. So there’s been levee banks built around Sunraysia.

Levee banks in the region have prevented properties from being flooded but create a new problem. They protect one area but send the water in a different direction, which causes other properties to be damaged.

What is your overall assessment of the risk rating system? 

I agree absolutely the concept is good, but like any concept, it can’t be fluffy. We have to actually get it right.

I’m keen to see insurers do better at their flood mapping and then the councils will take proper notice of them.

In this region, actually flood map properly and then charge people accordingly. If they’ve chosen to live on the river, they know their home is a high flood risk.

But it can’t be that every person in Mildura is rated the same way.