The government gives flood defences a lower priority than they deserve, said the Association of British Insurers (ABI).
In its response to the Department of the Environment, Food and Rural Affairs' (Defra) Flood and Coastal Defence Funding Review, the ABI said the government understated the benefits of flood defences and excluded many social and health costs of flooding.
It called for spending on flood defences to be increased by at least £145m a year.
ABI director-general Mary Francis said: "A failure by the government to respond sufficiently to our call will leave people and businesses in high risk areas with the double threat of regular flooding and limited or expensive insurance protection.
"The more the government is able to lower the risk, the easier it will be for insurers to provide the cover."
Defra is currently collating the 170 responses it received and expects a full report to be released late summer.