Insurance companies are being accused of cherry-picking risks despite having a social responsibility.

IAG plans to charge higher premiums for customers in areas prone to natural disasters and severe weather - prompting calls for an insurance forum.

Insurance lawyer Andrew Hooker told Mike Hosking the Government needs to regulate the industry.

He said insurance is a necessity, not a luxury.

"When you have got the whole market run by private sector companies that are driven by profit, if they are going to price themselves out of the market so some people can't afford insurance then we are going to have a major social problem. People simply have to have insurance."

Hooker admitted they are doing what any "sensible profit-making business would do". However, he said the companies also need to accept that they have a social responsibility to consumers.

"We used to have one [a state-owned insurance company]. IAG owns it now. So they have taken over all these companies and they are now using them to make a profit and I think they have to accept that they have a social responsibility."

He said more regulation is needed within the insurance industry to make sure people aren't being taken advantage of.