The peak body for insurers wants the Victorian government to invest in preparing communities for natural disasters instead of relying on insurance payouts that are bleeding providers dry.

Victoria's insurance bill from extreme weather last year totalled $450 million.

Floods in New South Wales and Queensland costed $5.7 billion in insured losses alone, making them the most expensive disaster in Australia's history.

Abbie Wilson, the director of National Insurance Brokers in Horsham, said she saw increases of 20 to 30 per cent, on average, in insurance premiums because of the floods.

She said the increases were necessary for the viability of insurance as a product, given the volume of claims lodged and the rising costs of rebuilding, labour shortages and supplies.

Ms Wilson said many providers tapped into their own insurance to pay out their clients' claims.

Call for code consistency

Insurance Council of Australia (ICA) public affairs general manager Mathew Jones says government investment in preparation will "sustainably put downward pressure on insurance premiums as well as protecting properties".

He said since the Black Summer bushfires in 2019 there was continuous financial pressure on insurance companies because of the frequency of extreme weather events.

Last year there were more than 277,000 disaster-related claims lodged across four declared insurance events nationwide, totalling $6.37 billion.

ICA figures indicated that insurers paid out $3.8 billion to date — $1.6 billion more than 2021.

The cost has been passed on to consumers.

"The policies of the many pay out the claims of a few," Mr Jones said.

Mr Jones said the situation was not sustainable and that the ICA wanted to see the Victorian government invest in preparing communities better from flooding.

These measures included building levees around towns and flood ways to direct water away from particular areas.

Mr Jones said raising houses and internal electrical and plumbing to above the expected flood line could reduce the cost of repairs after a flood.

He said building codes needed to be strengthened and made consistent across states because it was not mandatory for developers to consider the resilience of new homes in flood-prone areas.

Reducing the cost of premiums

Mr Jones said the ICA also wanted state governments to make insurance premiums more affordable by removing taxes such as stamp duty, which could be as high as 30 per cent.

"It only makes insurance more unaffordable at a time when more and more people are relying on their insurance to recover from these worsening events," he said.

Ms Wilson said there was not much that could be done to reduce premiums for people in flood-prone areas.

She advised people experiencing financial hardship to speak to a broker to discuss their coverage options.

"It's not like a power bill or your phone bill," she said.

Mr Jones said Victoria avoided the worst of the flooding in recent years, but it had not escaped entirely.

"Climate change is making extreme weather worse that's why we need to think about this differently and invest the money we need to, to better protect homes and communities," he said.