Letter to the Editor, Australian Financial Review

4 August 2011

In commenting on the interim report of the Queensland Floods Royal Commission, your editorial argues that land planning and insurance are where the biggest changes must be made ('Sensible to accept flood plain reality', August 2).

The Natural Disaster Insurance Review announced by the federal government in March this year is directly addressing all of the issues that you raise: discouraging people from living in flood prone areas, encouraging risk minimisation and sensible decisions about where to live, ensuring adequate flood mapping and seeing people in flood prone areas take out insurance against flooding.

The Review is considering submissions received in response to an issues paper that was released in June. That paper addressed the key issues of the availability and affordability of insurance for flood and other natural disasters. Insurance is a critical part of a community's and an economy's ability to recover from natural disasters and the issues paper put forward two models for improving access to flood cover: automatic flood cover (where flood cover would be standard in all homeowners policies) and automatic flood cover with opt out (where flood cover would be standard but homeowners could opt out).

But the Review is also focused on how to provide incentives to individuals and governments to mitigate the risks to the greatest extent possible. Many of those incentives do not exist now and there is potential through this review to deliver much improved outcomes in the future.

We have heard diverse views from a wide range of interested parties, such as insurers, banks, engineers, consumer groups and private citizens, some of whom were directly affected by the floods and other recent natural disasters. The issues raised are complex and there are many competing interests.

Collectively we have a once in a generation opportunity to fix the risk mitigation and insurance problems. The stories from this year's floods of personal and financial loss, of lack of awareness of flood risks, of people not knowing whether they had insurance cover or spending months in dispute with insurers over whether the damage to their homes was caused by flood or storm, are a repeat of what happened after the 1974 Brisbane floods. My aim and that of my review panel colleagues is to make sure that this level of financial loss and disputation does not happen again.

John Trowbridge
Natural Disaster Insurance Review