Standard flood insurance cover may not work

Comments on Andrew Fraser “Insurance rules need to change for flood-prone”, 20/01/2011, http://www.theaustralian.com.au/news/opinion/insurance-rules-need-to-change-for-flood-prone/story-e6frg6zo-1225991310180


Standardisation of flood definition is one thing, but the argument for standardised flood cover can be problematic.

Different locations can mean quite different risks of being flooded; even two locations may be very close due to the high-low positions.

Unless insurance firms choose to have standardised cover, they should be allowed to charge differently for different locations and positions of a property based on assessed risks.

The argument for standardised flood cover can be misleading and is certainly impractical.

It lacks a common sense.

Politicians should not take an easy way for a difficult issue, particularly immediately in the wake of a flood disaster when emotions are running very high.

Government should not provide a universal cover indiscriminately at taxpayers’ expenses. It can, however, mandate people to have insurance cover for certain natural disasters and panelise those who don’t, just as the federal government’s private hospital insurance.

The latter is not a good policy from public policy point of view, because it simply forces many people (and the government) pay for insurance but they don't use private hospitals and hence there is not much reduction in the pressures for public hospitals. It was an ill-considered policy with good intention.