Insurers price householders out of cover Across Australia, flood insurance premiums are rising. Photo: Andy Zakeli THOUSANDS of Australians are facing soaring insurance premiums for flood coverage, forcing many to ditch protection even as the risk of extreme weather increases. In Melbourne, a resident planning to build in South Caulfield with a one-in-100 year flood risk - like much of the area - simply had his insurance policy from Youi cancelled as "an unacceptable risk." A call to the insurer confirmed flood risk was the reason. For some, such as Tina Taylor, the hazard is obvious. Mrs Taylor's hobby farm extends half a kilometre along one bank of the Colo River, a tributary of the famously flood-prone Hawkesbury River, north of Sydney. Even so, when her insurer, NRMA, recently hiked the premium from $2000 to $8250, she had no option but to drop flood coverage. For others the increase is closer to 500 per cent. People are prepared to pay a reasonable amount for insurance but when the cost is unrealistic, you just go without. Insurers defend their tougher stance, noting the spate of flooding across many regions of eastern Australia in recent years - with another $733 million hit from January's big wet in Queensland and New South Wales. "Premiums fund claims and if claims go up, we have to increase premiums," Insurance Council of Australia chief executive Rob Whelan said. Insurers also hail the creation of a National Flood Insurance Database they say gives them unprecedented ability to assess hazards. "In some cases, we may have updated our flood mapping or are now better able to identify a property's exact location on a block," said Andy Cornish, chief executive of NRMA. He said that no single region had been re-rated. In other words, if 2 per cent of Australian homes are deemed to be at "extreme risk" from flooding, the industry knows where they are and will price accordingly - even if that makes policies unaffordable. Melbourne Water last week told the 8th Victorian Flood Conference that "Melbourne and the Port Phillip and Western Port region face significant flood challenges." Much of the city was developed before requirements to control development in flood prone areas. There are around 100,000 properties at risk of flooding," Melbourne Water said. The annual average damage bill was put at $245 million - but based on data only to 2007. While Melbourne Water said flood risks might be highest in more established suburbs, newer regions were also exposed as houses went up in regions known to have flooded in the past. Kingston City Council last year asked Melbourne Water to increase the number of properties deemed at risk of inundation to 11,500 from the 10,000 proposed, or almost one in five households. Even with the increase, the tally may be grossly underestimated, according to local flood researcher Alan Hood. "They are allowing properties to be built just below the 1952 flood level" or about 1.5 metres below the 1934 floods, he said. Mr Hood said some residents of Frankston, bordering Carrum Swamp to the east, have been asked to pay at least $5000 more for flood coverage, a sign insurers are recalibrating risk. The issue of those most needing flood insurance being unable to pay for it may come to a head next month when the federal government is due to respond to the Productivity Commission's final report on barriers to effective climate change adaptation. The insurance industry's losses from catastrophes almost tripled to about $10 billion in the five years to 2012 from the previous five years and are expected to rise further as a warming atmosphere increases the likelihood of intense rainfall and other extreme weather events, climate scientists say.