Farms and flood: underwriters explain reluctance, but direct insurer confirms cover

Leading rural underwriters CGU, QBE and Allianz have explained why they don’t cover flood risks for farm properties, while direct insurer Achmea has said flood is built into its farm policies.

As insuranceNEWS.com.au has reported, brokers have raised concerns about the lack of flood cover for rural properties.

QBE says its underwriting guidelines dictate that a farm policy is required if a property is larger than 2 hectares. Its farm policies do not include flood cover and it is not available as an optional benefit.

“QBE uses flood mapping data to calculate flood exposure, however this is based on the home being at the centre of the property,” a spokesperson told insuranceNEWS.com.au.

“On a large property, the home and other outbuildings can be located anywhere, meaning we currently cannot accurately capture or price the true flood exposure of large properties.”

Allianz says it also will not offer flood cover for parcels of land larger than 2 hectares.

“Flood cover is not able to be added to policies where there is a large parcel of land,” a spokesperson said.

“Because we don’t know exactly where on the block the house is located, we are unable to adequately assess the flood risk and hence determine the appropriate premium.”

CGU says its approach is “to look at whether the property is an operating farm, rather than based on the size of the property”.

“CGU’s domestic (personal lines) Home policies provide flood cover, however, if the property is written under a CGU Countrypak policy a specific flood exclusion applies,” a spokesperson said.

“The key challenges for providing flood cover for homes on farms is accurately determining the location of the property to assess the risk of flood and price the exposure accordingly.

“We’re not currently able to offer flood cover as an extension to our standard cover for CGU Countrypak, however, we are always looking to consider solutions that meet the needs of our customers.”

Farm specialist Achmea Australia says flood cover is “built in” to its policies – but it doesn’t sell its products through brokers.

“Achmea Australia uses the standard industry definition for flood and provides cover for the farmhouse, vehicles, other agricultural buildings and contents,” COO Kirsten Staveley said

“We offer this to the agricultural industry as it aligns with our purpose of keeping farmers farming.

“The destruction caused by the recent floods has served to remind us of the essential nature of food security, reinforcing the value of the agricultural sector and the importance of adequate insurance.”

Ms Staveley declined to comment on the reluctance of other insurers to cover flood, but said high flood risk on a property would need to be assessed.

Achmea does not work with brokers, instead sending its own farm insurance specialists out to understand clients’ needs.

“We partner with farmers directly,” Ms Staveley said.

“We are not in the business of paying commissions to brokers to distribute our product.”

Recently released Australian Prudential Regulation Authority statistics show that for the 12 months to June this year, Achmea reported gross earned premium of $69 million and a net loss of $27 million.

The Insurance Council of Australia says in flood prone areas the cost of flood cover is “increasingly unaffordable”.

“A particular challenge for insurers is their ability to price flood risk on larger properties where the risk of flooding may vary on different parts of the property,” a spokesperson said.

“Subsequently many insurers do not offer flood cover for houses located on these properties.”