Suncorp says it is prepared to reduce insurance premiums in Roma, in southern Queensland, by up to 70 per cent, provided the council follows through on building flood defences.
The insurer has refused to write new policies in the southern inland town after three major floods in as many years.
The Maranoa Regional Council says it is working on a mitigation plan that includes a levee, raising houses and a diversion channel.
Suncorp's Marcus Taylor says it is happy with the plan but now is the time for action.
"Once those measures are taken people will see a review of their premiums and premiums come down," he said.
"In some cases there will be up to 70 per cent of savings in premiums, particularly in high flood risk areas.
"While we price an individual risk we know you can control risk and so the more we do in working with all levels of government to build better flood protection the lower level of risk and therefore the bigger the increase or reduction in insurance premiums."
Maranoa Mayor Robert Loughnan says Suncorp's actions are "pointless" and is challenging it to lower its premiums now.
"We've got a process to go through, we're going through the community consultation, we're certainly not going to cut that out," he said.
"We have consulted with them [Suncorp] as we have consulted with other stakeholders but we're certainly not going to shortcut to a result that hasn't been properly designed or costed yet."
Councillor Loughnan says instead of pressuring the council, Suncorp should refund policyholders who have seen premiums rise.
"Whenever we are able to see Suncorp reduce their premiums to a more acceptable level, I'd certainly like to see the premiums that have been paid in the interim period returned to those people, it's been taken from them on a false pretext," he said.
"[It] does nothing to help the overall mitigation project and at the moment we're getting people re-signing with Suncorp simply because they're unable to get any other insurers to take an interest."
© ABC 2012
15:08 EST Western Australia's grain belt is expected to be dry for the next two months.