Uninsurable: The truth about Australia's flood insurance crisis
When floods swept through NSW's Mid North Coast and Hunter regions in May, they exposed a now-familiar cycle: evacuation orders, waterlogged homes, and another round of insurance claims.
Insurers moved quickly. The Insurance Council of Australia (ICA) says the industry "rapidly responded to support communities", deploying staff on the ground during the emergency and opening insurance hubs in Taree and Port Macquarie.
"While the clean-up is progressing well, we know that recovery goes well beyond the initial clean-up," an ICA spokesperson says. "There are often ongoing financial and emotional challenges."
But as insurers and residents work through more than 9500 claims, a deeper problem remains: "We continue to see the same homes flooded again and again," says the ICA.
This is one reason the industry is now pushing for government action on a $30 billion Flood Defence Fund, aimed at building resilience infrastructure across flood-prone catchments in NSW, Queensland and Victoria.
Kate Cotter, CEO of the Resilient Building Council, agrees that more needs to be done: "Large-scale resilience investment and innovation are urgently required to reduce risk and cost-of-living pressures."
Industry under fire
The most recent floods arrive in the shadow of growing public scrutiny over the industry's past performance. A federal parliamentary inquiry into the 2022 floods found widespread delays, poor communication and inconsistent claims handling.
Separately, Suncorp faced criticism over pricing practices after the Australian Financial Complaints Authority (AFCA) intervened to block a 60% rise in one homeowner's premium.
Suncorp has since acknowledged it hasn't always met expectations.
"We recognise that in some instances our past communications and practices have not always been adequate," says Alli Smith, executive general manager home claims customers.
The company says it has expanded claims teams, boosted staff training, introduced clearer guidance for customers, deployed mobile disaster hubs and invested in real-time weather monitoring to improve response times.
While insurers such as Suncorp have taken significant steps to improve response times and customer experiences, the wider industry is confronting a growing risk landscape.
In its 2022 report, Uninsurable Nation, the Climate Council defines "effectively uninsurable" properties as those where insurance premiums are expected to become so expensive that coverage becomes inaccessible.
It found that one in 25 properties could be considered "high risk" of being effectively uninsurable by 2030. But as the following shows, that figure might be conservative.
Lismore: The warning that keeps coming
Of course, the May flooding wasn't the only major flooding event on the Mid North Coast this year.
In March, ex-Cyclone Alfred brought yet another deluge to Lismore, pushing the Wilsons River to 9.3 meters - just below the town's 10.2-meter levee. A narrow escape, but a reminder of the 2022 disaster, when the river surged to 14.4 meters, swallowing entire churches.
If Lismore was the canary in the coal mine for Australia's flood crisis, it would be one very gassed-up bird. Major floods occurred in 2020, 2017, 2015, 2013, 2012 - and many times before.
Each time, the cost to rebuild rises. Insurance is supposed to help spread that risk. But as climate change fuels more extreme weather, the safety net is fraying. In some cases, it's gone altogether.
The 2022 floods triggered more than 245,000 claims worth $6.4 billion. But many households weren't covered at all. Allianz reported that 74% of its highest-risk customers had opted out of flood cover prior to 2022. In Northern NSW, the figure was closer to 90%.
In a submission to the government flood inquiry, major insurer Allianz revealed that premiums for flood-prone properties can be eye-watering: up to 4% of a home's insured value, and 13% for contents.
For a $500,000 home, that's a $20,000 flood premium, plus $13,000 for $100k of contents cover. With taxes, levies and fees, the annual bill for flood insurance alone topped $45,000.
And that doesn't include basic home insurance for fire, theft and other risks. The numbers simply don't stack up for most homeowners.
But Lismore is far from an isolated case. Across the country, an estimated 1.36 million properties face some level of flood risk, according to the Insurance Council of Australia. Of those, roughly 298,000 properties, including more than 220,000 homes, have a 2% to 5% annual chance of flooding. For many, premiums have already become unaffordable.
Climate Valuation, a property risk analytics firm, estimates around 380,000 homes nationwide are already either uninsurable or unaffordable to insure. Without significant intervention, that number could rise to one in 10 homes by 2035.
At some point, the maths stops working. Properties move from underinsured, where cover exists but falls short, to uninsurable, where no cover is available or affordable at all.
Who picks up the bill?
In March, the ICA declared Cyclone Alfred an "insurance catastrophe" after more than 63,000 claims were lodged.
But thanks to the federal government's $10 billion Cyclone Reinsurance Pool - funded by mandatory insurer contributions - insurers avoided massive claim costs, and consumers were shielded from sharp premium spikes.
No such protection exists for floods. That's why the ICA is lobbying for the government-backed Flood Defence Fund to fill the gap.
An ICA spokesperson says the plan as it would help "build the resilience infrastructure needed to protect homes from the increasingly frequent and intense flood events Australian communities face."
The fund would cost $30.15 billion over 10 years, shared by the Federal Government and the state governments of Queensland, New South Wales and Victoria, the states with the most highly exposed flood properties.
The ICA also claimed it would help moderate insurance premiums in those areas and reduce future recovery costs in the wake of disasters.
While $30 billion is a big number, the RBC's Kate Cotter says Australia needs "big ideas to solve big problems."
"Without long-term resilience investment, more homes will fall into the uninsurable category."
What homeowners can do
While large-scale public investment remains critical to keeping entire communities insurable, homeowners still have tools to help manage their personal risk, and in some cases, reduce premiums.
Smart sensors: Some insurers are using new technology to reward risk reduction.
Honey Insurance offers customers free smart sensors that detect water leaks, smoke and open doors or windows. "If you opt into our Smart Home program, you'll receive the sensors and get an 8% discount on your premium," says Honey Insurance COO Angelo Azar. "They help reduce claims, and if you're helping manage the risk, you should share in the benefit."
Suncorp's Haven project: In May 2025, Suncorp launched Haven, a digital tool designed to help Australians understand and strengthen their homes against extreme weather.
By entering their address, homeowners receive a tailored video and downloadable resilience report detailing their property's risk levels for bushfires, floods, cyclones and storms - along with practical steps to reduce vulnerability.
"With more than 2.7 million Australian homes identified as high-risk of at least one extreme weather peril, Haven enables all homeowners to understand their risk and the proactive steps they can take to safeguard their homes from future danger," says Suncorp chief executive consumer insurance Lisa Harrison.
Bushfire Resilience Rating App: Developed by the Resilient Building Council, this free app allows homeowners to assess and improve bushfire preparedness.
Several insurers, including NRMA and Suncorp, offer discounts for households using the app, while NAB offers interest rate incentives for participating in home retrofit programs.
In October, the federal government backed an expansion of the Bushfire Resilience Rating App to also cover flood risk.
Later this year, the RBC will launch its broader Disaster and Energy Efficiency Resilience Rating, which scores homes across multiple hazards: bushfire, storm, flood, cyclone, heatwave and thermal performance.
FORTIS Project: The RBC's FORTIS initiative provides free architectural designs and guidance to help homeowners rebuild more resilient homes, including raising floor levels, modifying structures, or using water-resistant materials in flood-prone areas.
While these innovations and guides help, understanding your insurance policy remains critical, says Mozo insurance expert Rachell Wastell.
"In flood-prone areas, insurers may require homeowners to maintain drainage, raise electrical outlets, or install flood barriers," she says.
Bushfire risk comes with its own maintenance obligations, such as clearing gutters and removing flammable debris. Even storm-related claims can be denied if, for example, a fallen tree was poorly maintained.
"The best defense is preparation," Wastell advises. "Understand your policy, take proactive steps to manage risks, and set aside a rainy-day fund for unexpected expenses."
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