Rochester homes at risk as insurers bail out of flood zones

Rochester residents are struggling as insurance premiums jump by almost 400 per cent ... and that’s if they can get a policy at all.

Insurance companies are refusing to renew household policies for many Rochester flood victims, throwing the town into fresh turmoil.

The Insurance Council of Australia has blamed high construction costs for repairs and rebuilds in part for sharp premium increases and declined policy renewals.

The increase in policy prices, and flat-out denial of some renewals, has prompted Northern Victorian upper house Liberal MLC Wendy Lovell to call for the state government to intervene on behalf of Rochester residents.

“If the insurance companies make it too difficult for Rochester residents, my concern is people will look elsewhere to resettle,” she said.

“We need is to establish a consumer affairs presence in Rochester so people can get assistance in dealing with insurance companies.”

The town of Rochester, which went underwater in 2022, is facing a new struggle, with insurers unwilling to cover homes located in the flood prone region. Picture: Jason Edwards

Rochester is home to about 3100 people in about 1500 homes.

Rochester Community House flood recovery co-ordinator Tanya McDermott said insurance was at the forefront of mind for many in the small Victorian town.

“Some people have had their annual insurance bills go up significantly, but others are denied insurance,” she said.

“When insurance companies won’t cover a property, it affects an individual’s ability to get a mortgage. And if the property is subsequently sold, it severely restricts the buyer market.

“And that impacts the town’s ability to recover and regenerate.”

Hairdresser Leisa Cody, who lost her house to the flood, says her insurance premiums have risen from about $1300 to $5000. Picture: David Caird

Hairdresser Leisa Cody, pictured, is among those facing fresh difficulty because her existing insurer, wary of future floods, is refusing to renew her insurance policy.

“I did an online quote for APIA for my new house in Rochy that we will move into in the next few weeks and it came in at $5000 after declaring I’d had a claim in the past three years and by flood,” she said.

“When I tried to reinsure with ING online for both my old address and new one it came back with ‘we cannot offer you insurance at this time’.”

Her previous premiums sat about $1280 each year.

“It’s just wrong because you pay and pay for years in the hope you won’t use it and then when you do, they pay you out and then they don’t want to know you after that,” Ms Cody said.

“Because when you settle with the insurer that’s the end of the policy and you need to take out a new one.”

Ms McDermott said Rochester had a lot of older housing stock and some residents were also having difficulty getting their insurance claims approved due to queries over foundations.

“A lot of people are being told that there were pre-existing structural problems with the property and they will not be helped with the flood damage until they fix their stumping — which can cost tens of thousands of dollars,” she said.

“Those people are in a really hard situation.”

While there are some “positive stories”, Ms McDermott said she was referring Rochester residents to the Disaster Legal Help Victoria service daily.

Meanwhile, Financial Counselling Australia’s Peter Gartlan said there were signs of market failure and it may be necessary for the federal government to offer a guarantee.

“We might need think very differently about insurance in Australia going forward,” he said.

“The insurers are ratcheting up premiums and if people simply cannot afford them or they are denied coverage altogether than we need a federal government guarantee to be bought in.”

An Insurance Council of Australia spokeswoman said insurers were changing the way they assessed risk in flood prone areas.

“As the risk of extreme weather worsens, insurance can become increasingly costly particularly for those in high-risk areas,” she said.

“Given the intense flooding that many parts of Australia have been experiencing over the past two years, some insurers are reassessing flood risk across their portfolio.”

The spokeswoman said the factors weighing on insurers included impact of inflation and the cost of doing business.

“High rebuild and repair costs across Australia. CoreLogic reported an escalation of 11.9 per cent in construction costs between 2021 and 2022,” she said.

Homeowners unhappy with their insurers can lodge complaints with the Australian Financial Complaints Authority.