Allianz to introduce flood cover as standard in home insurance policies

Allianz will be changing its Householder insurance products to include flood cover as standard for all new customers of our Home Building, Contents and Landlords policies. This aligns Allianz’s home insurance policies with the approach to flood cover taken by most other insurers in the market. This change is planned to commence in late 2024.

On renewal of their policy, existing Allianz home insurance customers with a low to moderate flood risk who have previously not taken flood cover will have this cover included as standard. The premium impact on most of those policyholders will be modest. The average annual flood premium impact for policyholders with a low flood risk will be less than $20 before taxes (GST, Stamp Duty and Emergency Services Levy (NSW)). For some customers with a moderate flood risk, the average impact on premiums will be less than $100 before these taxes.

As a result of this change, existing customers with a low to moderate flood risk, and all new policyholders, will have the confidence that they are covered for flooding, regardless of whether it is caused by rainwater runoff or riverine flooding.

Allianz’s existing high flood risk customers with policies that do not have flood cover will be able to continue without flood cover. This is because the flood premium for these customers can be in the tens of thousands of dollars and making flood cover standard could threaten their ability to retain home insurance.

For these existing high-risk customers that do not have flood cover, in addition to the Standard Definition of Flood¹, Allianz’s flood cover exclusion will also exclude rainwater runoff. This will speed up the claims assessment and decision-making process because there will no longer be a need for a hydrology report to assess flood damage claims. In this context, Allianz supports the proposal for a standard definition of rainwater runoff contained in The Treasury Consultation Paper, Standardising natural hazard definitions and reviewing the standard cover for insurance, released in March 2024.

Improving affordability of flood cover

Allianz remains concerned about the affordability of flood cover for property owners with high flood risks. Allianz urges State Governments to remove taxes on property insurance, such as Stamp Duty (circa 10%). Allianz welcomes the NSW Government’s commitment to remove the Emergency Services Levy from property insurance policies and encourages the Government to move to implement the proposed change as soon as possible. Allianz also calls on State and/or Local Governments to cease approving residential development on flood-prone land, as well as introduce or expand the availability of flood adaption schemes, such as grants to raise flood-prone houses and the use of land buybacks or swaps.

Allianz encourages the Australian Government to work with insurers on a partnership approach to addressing flood cover affordability, for example, through the establishment of a government reinsurance facility similar to the recently established Cyclone Reinsurance Pool.

Why is Allianz making this change?

In response to the devastating 2022 floods, Allianz reviewed its current optional flood cover home insurance product. The review found that optional flood cover resulted in delays for some customers because of the need for hydrology reports, and confusion about coverage for many customers who had not purchased flood cover.

When a customer does not have flood cover, hydrology reports are required to assess whether a partial claim for rainwater runoff can be paid, even if they are unlikely to have an eligible claim for damage caused by riverine flooding. The scale of the 2022 floods meant that Allianz needed to commission more than 1,000 hydrology reports. In addition to a significant cost, this resulted in long delays due to the demand and supply imbalance for hydrology services.

For Allianz’s existing home insurance customers who continue to not have flood cover, the extension of their flood exclusion to exclude rainwater runoff, in addition to riverine flooding, will negate the need for hydrology reports to distinguish between riverine flooding and rainwater runoff. This approach will avoid the delays created by the need for hydrology reports, resulting in quicker decision-making and improved clarity of coverage for policyholders.

¹ Insurance Contracts Regulations 2017, Division 2 – Definition of Flood

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About Allianz Australia

Allianz Australia has been securing the future of our customers in Australia since 1914. We deliver a wide range of personal and commercial insurance products and services to more than 4 million policyholders. We also provide support for workers' compensation insurance to around 25% of the top 200 ASX companies, making us one of the leading workers' compensation insurers in Australia.

Allianz Australia Limited is a wholly owned subsidiary of the worldwide Allianz Group. The Allianz Group is one of the world's leading insurers and asset managers with corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life, and health insurance to assistance services, credit insurance and global business insurance. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index.

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This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 (“Allianz”). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.

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