Can I get Flood Insurance?
I know this article is not very timely as Cyclone Debbie has come and gone and left within its wake devastation and destruction.
My family moved to Lismore when I was 1 year old in 1973. We have seen our fair share of flood. Approx. 35 floods in that time. I have grown up with Lismore and its ability to flood and cause devastation. I remember wading waste deep into businesses, helping wash down the walls and restack the shelves as the water was going down so they could get back into business again as quickly as possible. It stinks, its hard work but it has to be done. Business is resilient…mostly.
It is somewhat disappointing that flood cover is not “just given” to everyone so we can all have that financial protection that is now mainly offered to those who can pay for it.
After the 2011 Floods in Brisbane that caused widespread damage the Government legislated that if an insurer was to provide flood cover the same wording and interpretation was to be used in every policy. So two houses standing side by side damaged by flood waters would be treated equally, not have one insurer say no and another say yes.
Sadly if you didn’t buy a policy including flood cover because it was too expensive, there is little anyone can do for that situation. It’s a case of ‘you get what you pay for’.
If you chose to elect not to take flood cover as some insurers have an opt out mentality like Allianz Insurance does then it’s also hard to argue that one for you.
If you can’t get flood insurance because the risk is simply too great for even an insurer to take on board, this is more of a social issue, being that we love to live near water. Councils have allowed us to build in certain places and are only lately enforcing flood height restrictions for building. So how is it acceptable to force an insurer to take on this risk?
Insurance is all about unforeseen risk, but when the risk is predictable and has happened over time then this doesn’t fit insurance. Mutual & Friendly Societies formed decades ago pooling money to distribute to those society members in need at their time of need. If there wasn’t enough money in the kitty they would increase subscriptions. It’s the same with insurance.
Let’s look at a few case scenarios of people I have engaged over the years about flood insurance:
A couple of years back I quoted a potential clients commercial property insurance. It was operated as a motel and worth approx. $3 million to rebuild. I quoted him $5,500 for his insurance including property damage and liability insurance. Seems reasonable I thought. Then he asked about flood insurance. After discussion with the insurer I received a quotation for $215,000 to cover flood damage to his property for up to $3million. WOW! $5,500 to $215,000. I was flabbergasted!
Then I started thinking. If this building was completed wiped of the face of the earth like in outer Brisbane the insurance company is up for the entire $3 million. Fair or unfair, who would take those odds for less?
What if the banks force you to take flood insurance? Well, a caravan park with property worth $1.5million on a river in NSW that does flood had exactly that situation. Prior to that the premium was $5,500, with flood insurance it was $40,000. So to make that commercial purchase they had to factor into their budgets an insurance premium of $40,000.
I heard recently from a friend and business owner Chris Macris from North Coast Stationery in Woodlark Street Lismore who has been through plenty of floods since starting his business in 1983 that he reckons after speaking to fellow business owners there will be at least 15 businesses not reopen their doors. There are always businesses that have only just set up weeks if not months ago that had no cover and the Commonwealth Bank is doing a $2 million refit after the floods and won’t be open for another month.
So what can we do? What is the right answer? Should we legislate so that everyone pays into a central fund for these catastrophes and take the matter out of the hands of the insurers and their risk profiling?
If so does this only affect the tax payer as this is the only way to collect funds for the Government?
Let’s think for a second…
• 1.5% Medicare Levy
• Emergency Service Levy that was imposed on all insurance in NSW which has now been cancelled
• Fire Services Levy which is now being removed as at 1st July 2017 in NSW
Do we now need a 1% disaster levy across all property & business which is kept in a central fund managed by an external organisation responsible to the Government, exactly like we have with the Terrorism levy that exists and not many people know does.