Crazy insurance decision a ‘postcode lottery’

A man living on the 32nd floor of an apartment building has been left stunned by an insurance decision that he can’t make sense of.

A man living on the 32nd floor of an apartment building has been left stunned after an insurer declined to offer him $50,000 of contents cover due to the risk of flooding from Melbourne’s Yarra River.

Melbourne man Jeff, who did not want his last name published, told The Australian Financial Review that Virgin Money declined to renew his insurance – despite him living approximately 100 metres above street level – because his building, which is several hundred metres from the Yarra River, is considered to have a high flood risk.

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A man living on the 32nd floor of an apartment building has been left stunned by an insurance decision made on flood risk grounds.

Jeff, 52, said he didn’t have any ground floor storage within the building and challenged the decision, but the response he received from Brisbane-based Auto & General, which underwrites Virgin Money’s contents policies was that the company had reviewed its risks after Australia suffered “numerous major weather-related events”.

Auto & General confirmed to The Australian Financial Review that it could not renew the policy because of a “heightened flood risk” that fell outside its acceptable criteria.

Jeff referred the decision to the Australian Financial Complaints Authority (AFCA), but the regulator sided with his insurer, telling Jeff that there was no evidence the refusal to renew cover was “made indiscriminately, maliciously or was based on incorrect information”.

According to an Auto & General spokesperson, the decision was based on its latest flood-mapping models, which only considered the ground-level flood risk of the apartment building.

“Currently there is no national database that links apartment floor level with access to basement or ground level storage, where possessions could also be stored,” the spokesperson said.

Jeff was able to buy insurance from another provider, but blasted Auto & General’s decision as a “postcode lottery”.

The government is currently holding an inquiry into insurers’ responses to flood claims and the availability of flood insurance. Picture: NCA NewsWire / Martin Ollman

The government’s House Standing Committee on Economics is currently conducting an inquiry into insurers’ responses to claims resulting from the major floods in 2022.

The inquiry is also considering the affordability and accessibility of flood insurance and follows several floods in 2022 around Australia, including floods in Northern NSW that year which became the most expensive insurance event in Australia’s history.

In submissions to the inquiry, Auto & General wrote that it takes detailed flood mapping of localised areas into account rather than just using postcodes.

“Flood risk is generally determined at a specific address level, taking into account the

actual location of the building on the parcel of land (where possible), and using detailed flood

modelling and mapping from multiple external data sources,” the company claimed.

In the past year, insurance premiums grew at their fastest rate in 22 years but despite unveiling huge profits, insurance companies have managed to escape price gouging scrutiny.

According to the Australian Bureau of Statistics (ABS), premiums for home and motor insurance increased by an average of 16.2 per cent in 2023.

Insurers claim the increases are mainly due to the increased insurance claims costs of major weather events, such as flooding.

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