Residents in flood-prone communities are being forced to foot the repair bills to their homes rather than rely on an insurance payout, a Senate inquiry has been told.
Some homeowners living in regional NSW communities are still waiting to rebuild after the 2022 floods as they wait for insurance companies to assess damage costs.
Yet uninsured residents have returned to their homes because they were able to use a government grant to pay for repairs, Lismore Mayor Steve Krieg told a hearing in Ballina on Thursday.
"There are still cases to this day where people are waiting on insurance outcomes," he said.
"So they're living in homes that are untouched post-flood, because that's what they were told to do."
The inquiry is investigating the impact climate change is having on insurance premiums and availability.
Another north coast mayor recalled how a Lismore resident had decided to self-insure after a flood in 2007 and was able to quickly get back on his feet in 2022.
"He lost everything, but he still had a bit of money put aside because he decided to insure himself rather than pay that exorbitant premium," Ballina Mayor Sharon Cadwallader said.
The increased incidence of natural disasters and expansion of housing projects into flood-prone regions were pricing homeowners out of insurance, the inquiry heard.
"I'm finding that people are not insuring at all now because of cost-of-living pressures, they just can't afford it," Ms Cadwallader said.
Insurers blame the increasing size of payouts as the reason flood-prone communities are forced to pay higher premiums.
About $17 billion has been paid in claims from 13 disasters since the Black Summer bushfires in 2019 and 2020, the Insurance Council of Australia says.
As a result all property owners were paying more, contributing to higher inflation.
Premiums rose 14 per cent in the year to the end of June, the most recent official data from the Australian Bureau of Statistics shows.
In March 2022, insurers were hit with nearly 300,000 claims over losses from eastern Australian floods, which cost the industry almost $6 billion, the biggest single payout in Australian history.
Insurance prices are set based on risks, meaning as extreme weather events become more common the price of insurance will continue to rise.
The direct costs from extreme weather events to the industry are estimated to grow by about five per cent each year and reach more than $35 billion by 2050.
The problem is made worse by increasing urban development in flood-prone regions that lack the infrastructure to mitigate the risk of property damage, the insurance council said in its submission to the inquiry.
The inquiry moves to Brisbane on Friday to hear evidence from local businesses, climate advocacy organisations and local government.
It is due to report to the Senate on November 19.
