Insurers 'abandon' flood-hit NSW towns

People living in the central-western NSW town of Forbes are reportedly being abandoned by insurers in the midst of a major flood disaster.

Forbes Mayor Phyllis Miller says some people with existing policies have received letters saying they will not be renewed, while others say insurers refused to cover them to begin with.

Ms Miller accused insurers of applying blanket bans on flood policies for the entire town, regardless of their actual flood risk.

"Of course all of the town does not flood. We have hills in Forbes," Ms Miller told ABC TV on Tuesday.

"There's a moratorium on giving flood insurance to anyone (in the Forbes postcode).

"So if you live on a hill, or you live next to the river, you're all getting treated the same, which is appalling."

Prime Minister Anthony Albanese and NSW Premier Dominic Perrottet were grilled over the issue during a tour of flood-affected Eugowra, 30km east of Forbes.

Mr Albanese described it as a challenge the government was trying to work through with insurance companies.

"It's one of the things that we heard today about, that so many people haven't been able to get insurance because of the high premiums," he said.

"It's something that the government is attempting to deal with over a period of time."

Mr Perrottet said he had spoken to the Insurance Council of Australia (ICA), and that both levels of government were working to ensure support was being provided, including considering specialist policies.

"Insurance companies should put people before profits," he said.

A spokesperson for the ICA said that in some cases during disasters such as floods, insurers place a temporary embargo on providing new policies until the threat from the disaster has passed.

This is to avoid an influx of new claims when disasters hit, but could also give the impression of insurers avoiding providing coverage for those in need.

The ICA is urging governments to take steps including investing in mitigation strategies such as levees and flood-proofing homes, adapting planning to not build homes on flood plains, and including a resilience measure in the National Construction Code.

"We know that the cost of flood cover can be prohibitively high for some who are faced with high flood risk, leading them to opt out of flood cover altogether," the spokesperson said.

"Given the worsening impact of extreme weather, governments and the community should also look at whether property buy-backs are an appropriate policy response."

Ms Miller said she was concerned the issues with insurance would turn people off moving to the town.

"We don't flood all the time," she said.

"Admittedly we have had four or five floods in the last six weeks, but we can go 20 years without a flood.

"I'm disappointed that this may be a detractor of people coming and living in Forbes."