Many businesses could become uninsurable unless the government ups efforts to restrict building on flood plans, the insurance industry has warned.

Speaking at the Architects' Journal conference this week, Justin Jacobs, assistant director of property for the Association of British Insurers, said that a third of the three million homes to be built in the UK by 2020 could be on a flood plain, making many of them "unsaleable, uninsurable and uninhabitable".

He urged the government to introduce tougher planning controls to tackle the problem, noting that 13 major developments have been granted approval in the past year despite warnings from the Environment Agency that there was a flood risk.

Malcolm Tarling, a spokesman for the ABI, said that while the trade group had focused its warnings on home insurers the same concerns applied to businesses located in flood risk areas. "The warnings apply to commercial properties as well," he said. "In many ways the issue is more pronounced for businesses as the value of the property tends to be higher and you also have to cover the stock."

He added that where firms located on flood plans can continue to find insurance cover they are likely to face higher premiums. "The premiums will always reflect the risk and if the risk of flooding increases so will the premiums," he explained.

The government insisted that new powers introduced last year would help tackle the problem by forcing councils to consult with the Environment Agency about plans for buildings in flood risk areas and giving central government the power to overturn councils' decisions where there was an excessive risk of flooding.

Tarling said that the government had to demonstrate that it is willing to exercise these powers and should also require councils to publish the rationale for planning approval in instances where they have ignored Environment Agency advice.

The warnings follow major flooding in Gloucestershire and Yorkshire last summer that were estimated to have cost upwards of £3bn. Climate scientists have repeatedly warned that large scale flooding will become increasingly common in the UK as a result of global warming.