Relocation looms for homes in flood-hit towns where insurance is almost impossible

Major flooding in Victorian towns twice in two years means residents will almost certainly face significant rises in insurance premiums, amid warnings that uninsurable homes may need to be moved out of extreme flood zones.

Rochester was cut off on Tuesday while parts of Seymour and Yea endured evacuation warnings as floodwaters peaked in central Victoria, inundating a number of homes and businesses in towns that were already severely flooded in 2022.

Aimee and Chris Lindrea and their children at their Rochester home on Tuesday.Credit: Jason South

While the emergency warnings were downgraded as flood conditions eased, Victorian SES chief officer of operations Tim Wiebusch warned there was still a risk for those in the northern and eastern parts of the state. Echuca is in the path of the flood.

“We are seeing an easing trend now with flash flooding, but riverine flooding is still an active consideration, right across the northern parts and also Gippsland,” he said. Wiebusch said there could be up to 20 properties inundated with above-floor flooding in the Kialla and Shepparton areas.

After the 2022 floods, there were reports that some insurance companies were refusing to provide property insurance to people in Rochester and Seymour, while others had increased premiums by several thousand dollars a year.

The Insurance Council of Australia said it had been lobbying for the expansion of home relocation programs for areas at the most extreme risk of flood and more funding for disaster mitigation measures, including flood levee systems.

“Insurance prices risk, so greater investment in these types of resilience measures will not only better protect communities like Rochester and Seymour from future flood events but will also moderate insurance premium costs,” an insurance council spokeswoman said.

“The [insurance council] encourages residents to contact their insurers as soon as possible, even if they don’t know the extent of the damage, to get the claims process started.”

Alexandra Kelly, from the Financial Rights Legal Centre, said premium increases in flood-prone areas were inevitable without a co-ordinated response from government and the insurance sector.

She said governments could trial home insurance subsidies in communities where insurance was unaffordable and adopt a national approach to planning for relocating communities at high risk of natural disaster.

Chris Rodd, an insurance mediator who has been involved in flood claims since the 1990s, said the cost of flood insurance in central Victorian towns regularly being struck by flood events would “go through the roof”.

“In places like Rochester, the greater the frequency of the inundation and the cost to the insurer, the more likely it is that there’ll be a very substantial hike in premiums,” he said.

Rodd said insurance companies could increase premiums by 35 to 45 per cent, depending on the eventual cost of claims from the latest flooding.

“You think about Rochester, it’s not a wealthy town ... they can’t afford these massive premium increases.”

Wiebusch said about 20 homes and businesses in the Seymour area had been flooded. Four of the flooded homes had been unoccupied since the last flood in October 2022, when hundreds of homes and businesses went underwater.

Rochester, also devastated in the 2022 flood, experienced major flooding, while six homes were inundated above their floors in Yea.

John Trowbridge, an insurance industry consultant, said it was likely there were now people living in the affected towns without flood cover due to the high cost.

“It’s very unusual to have a flood in the same area just two years apart. And it’s not only happening in central Victoria, it’s happened up in south-east Queensland and northern NSW as well,” he said.

A man pushes his bike through floodwaters in Rochester.Credit: Jason South

“Every time there is a flood … the insurers will reassess, and they will almost certainly consider the risks to be higher, so they put the premiums up.”

Trowbridge said some properties in the northern NSW town of Lismore, flooded twice in 2022, and in western Sydney were now attracting insurance premiums around $25,000, which made insurance unaffordable to many.

Rodd, who formerly worked as a national claims manager for a major insurer, predicted that insurance would soon only be attainable for the wealthy, meaning that people would lose their homes in natural disasters unless the government stepped in.

“It’s getting to the point that the [increased] frequency of these floods, which are inextricably linked to climate change, is going to create [two classes] of people: those who have insurance, and those who don’t.”

While visiting flood-affected Seymour, Premier Jacinta Allan said she would ask the federal government to support Victoria through the clean-up.

“I can accept and understand that for particular households in particular communities, when you’ve gone through the loss of a property, that is really, really, really deeply personal and a difficult experience to go through,” she said.

“That is why we are working incredibly hard through Emergency Recovery Victoria to support both individuals with particular targeted support and then broader community supports.

“Victorians can absolutely expect that we will push the federal government for a fair share of funding for affected communities, and indeed for issues that affect Victoria.”

In 2021, the $10 billion northern Australia reinsurance pool was established to insure 880,000 residential and small business properties that had reached the uninsurable threshold. Some experts have called for that to be extended to a national scheme.

Victorian Emergency Services Minister Jaclyn Symes said getting insurance had been difficult for people in flood-affected areas for some time.

“My family home flooded in ’93 in Benalla and a lot of people in Benalla don’t have flood insurance because they are priced out,” Symes said.

“These are conversations that I am continuing to have with the federal emergency management commissioner. We have these conversations at our state and federal meetings.”

Emergency Services Minister Jaclyn Symes in Seymour on Tuesday.Credit: Darrian Traynor

Asked about flood insurance claims in Queensland on Tuesday, federal Treasurer Jim Chalmers said insurers needed to ensure they weren’t “stuffing around” customers.

“Our message from all three levels of government to the insurers is very clear – do the right thing by your customers,” Chalmers said. “People have been through hell in some of these communities.”

Many Victorian caravan parks, often located near waterways, are now unable to obtain flood cover, said Victorian Caravan Parks Association chief executive Scott Parker. He called on the state government’s insurer, the Victorian Managed Insurance Authority, to provide insurance coverage in some instances.

“Great park operators with a zero-claims history are either having to self-insure their businesses or accepting terms from unauthorised funders so they can operate for holidaymakers and to keep people in their caravan park homes,” Parker said.

Goulburn River Caravan Park manager Matt Borrack was examining cabins inundated by Monday’s floodwaters and said he was feeling, of all things, thankful.

“We’re lucky, I reckon,” the Seymour local said. Despite record-breaking rain in nearby catchments just over 24 hours before, there was no longer a cloud in the sky and the temperature nudged 30 degrees.

“The last floods probably cost us $1.2 million-plus,” he said. “We were shut for five months, so we lost income. We spent probably $800,000 plus rebuilding. And no insurance.”

In the October 2022 floods, the entire caravan park was underwater, and Borrack had to kayak to cabins to turn off gas bottles. Fifteen months on, only three cabins and one caravan have been impacted by above-floor flooding.

Goulburn River Caravan Park manager Matt Borrack walks through the flooded site on Tuesday.Credit: Darrian Traynor

The damage, although minor, isn’t cheap: Borrack expects the final bill to be around $20,000. However, he and others working at the caravan park won’t know for sure until water pooling at the back third of the property begins seeping down stormwater pipes and back to the river.

Borrack hopes to welcome back tourists as soon as next week.

“We’ve got no general insurance at the moment. No [caravan] parks now can get general insurance. The insurance industry have wiped their hands of parks even though they didn’t pay anyone out [in 2022]. You go, ‘Why?’”

One of the cabins inundated on Monday had fresh flooring installed days ago. Another cabin, which also went underwater in October 2022, was still awaiting renovation.

“We hadn’t even fully reopened from the last one. [But] it’s going to be more of a general clean-up this time.”

Courtney Carroll, the owner of The Mower Shop in Seymour, spent Monday – her first day of trade since the Christmas break – moving stock given the shop was mired in waist-deep water during the October 2022 disaster. The shop didn’t flood this week, but water came right to the entrance before receding.

“I’ve got a major issue with these gutters out the front,” Carroll said. “They can only take so much water and then the stormwater keeps inundating all these factories along here. So something’s got to be done.”

The mother of two is currently fighting a corporate insurance claim resulting from the 2022 floods. The insurance company in question has refused compensation on the grounds its modelling suggests the inundation was caused by the Goulburn River.

Submerged play equipment at the Goulburn River Caravan Park in Seymour.Credit: Darrian Traynor

However, Carroll has spent $16,000 on a private hydrologist who found the water came from the nearby stormwater system. The matter is currently before an independent arbitrator who is yet to make a final decision.

And if the stress of Monday wasn’t enough, Carroll’s family home, also flooded in 2022, still isn’t habitable. New flooring is yet to be installed, and her home insurance costs have increased fivefold since the last deluge.

Allan toured Seymour on Tuesday, and Prime Minister Anthony Albanese is expected to visit Melbourne on Wednesday to receive briefings on Rochester, Yea, Seymour and surrounds.

Carroll said she had a message for the Labor leaders. “My [home] insurance is now $20,000 a year,” she said. “How’s that happening? Who’s monitoring this?”

Several cars navigate the floodwaters in Rochester on Tuesday.Credit: Jason South

Nationals state MP Annabelle Cleeland, whose Euroa electorate includes Seymour, said the Allan and Albanese governments needed to urgently invest in flood mitigation and insurance reform.

“Seymour grapples with falling business confidence every day due to unresolved issues surrounding residential and commercial insurance,” she said.

Bureau of Meteorology forecaster Michael Efron said the weather was becoming more settled across the state after heavy falls of about 70 to 80 millimetres across much of Gippsland late on Monday.

He said a severe weather warning was cancelled for eastern Victoria, but there was a “slight chance” of isolated thunderstorm activity over the far north-east of the state.

“As we head into Wednesday and Thursday, we are going to see those pretty settled conditions continuing with just a slight chance of some isolated showers and storms in the far east and north-east,” he said.

“We are likely to see that shower and storm activity become a little more extensive over eastern and north-eastern districts, so with that activity, we could see some heavy rainfall but certainly not as much and not as extensive as what we have seen over the last few days.”

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