Several insurance companies are abandoning Mallee postcodes in response to the Victoria and New South Wales flood crisis.
The restriction was applied by insurers to prevent new insurance from being purchased while the floods impacted locations across the state, leaving some new home owners vulnerable.
Residents who were due to renew their insurance said their premiums had increased.
Pensioner Kay Sturgeon said her insurance fee increased by 53 per cent due to premium rises at AAMI as a result of the embargo.
Ms Sturgeon said she moved to Gol Gol in Sunraysia 15 years ago.
She said the rise was her first experience with an insurance embargo.
"What we paid last year was $1,374, the year before it was $1,316 and [this year it] went up by $831," Ms Sturgeon said.
She said her broker told her companies were not insuring anyone because of what was going on with the floods.
"He said he would try to get me the next cheapest insurance," she said.
"That went on for about the day before my policy was due and it turned out, he could only get something to pay twice the premium that I was offered by AAMI."
Gallagher Insurance Services broker Sean Gallagher said similar stories were happening to existing policyholders forced to renew their contracts during the embargo.
"We have found that there are a couple of companies that have indicated that they're not actually going to be accepting insurance in Mildura, which is hard to understand due to the fact that we didn't have any floods," he said.
"The ones that are staying, we have found that a number of companies have increased their rates by as much as 40 or 50 per cent and they will all review their flood premiums.
"Rates will go up significantly. They'll probably become unaffordable in a lot of areas and we're having significant difficulties in finding reasonably priced insurance for homes."
An AAMI spokesperson said insurance pricing was based on a range of factors including assessment of risk for an individual property, the cost of claims, reinsurance premiums and government taxes.
"In recent years, we have seen an increase in both natural hazards and reinsurance costs across Australia, which impacts premiums. Another factor which contributes to higher premiums is stamp duty and GST, both calculated as a percentage of the technical premium," they said.
"Premium increases are never a decision taken lightly and we're mindful of the impact changes can have on our customers. AAMI is committed to ensuring our customers have the coverage they need and we encourage all those who are experiencing concerns to reach out to us to discuss their policies."
Community in chaos
Mr Gallagher said insurance companies had significant losses due to fires, hail, and floods across the state.
"The perils typically here would be a flood but, to be honest, I've been doing this for 33 years, and this is the first full embargo that Mildura has had," he said.
Insurance embargoes can apply to all types of insurance products, including home, contents, and motor insurance.
Mr Gallagher said it threw the whole community into chaos when people could not settle on homes or get insurance on equipment.
Mr Gallagher said he was confused why the Insurance Council of Australia did not provide consistent and transparent flood mapping data for brokers and buyers.
An insurance council spokesperson said flood hazard was location-specific.
The spokesperson said insurers understood that it was not possible to make estimates of flood risk based on a postcode.
"To ensure that insurance premiums reflect the risk at an individual address, insurers have access to address-specific flood hazard data through the National Flood Information Database that includes flood maps submitted by local councils and other sources," the spokesperson said.
"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."
Insurance companies walk
The spokesperson said insurers regularly undertook risk reviews of policy offerings and portfolios, and some customers around Australia had been issued with notices that their insurance policies would not be renewed.
"The insurance council was made aware of insurers notifying customers that their insurance policy would not be renewed in late November," the spokesperson said.
"These business decisions are made by insurers through internal processes, such as a review of updated flood mapping."
The spokesperson said policyholders should buy cover well in advance of disaster season and shop around to find a premium that suited their circumstances and budget.
