Insurance Australia Group has determined it will cover businesses in Sydney's south west for only centimetres of the loss and destruction caused by this month's super storm.

IAG, which includes CGU and NRMA, has defended its ruling that the inundation to shops on Argyle Street was caused by both flooding from Stonequarry Creek and stormwater.

Hundreds of thousands of dollars worth of damage was caused to Alted Printing, but owner Ted Rixon said CGU had advised it would only allow him to claim on 10 centimetres of the water.

Mr Rixon said the extra 1.2 metres of water would be considered damage caused by flooding from the creek, for which he had no cover.

"It's like putting a car in for service and the motor's gone and they say well we'll fix the gear box for you," he said.

"I have been in business for 30 years, I have been paying my premiums all this time, and then you put in a claim and now they don't want to pay.

"They are quite willing to take the money off you, but the minute they've got to pay out they come up with all these little loop holes."

Mr Rixon disagreed with the determination and is now worried CGU will not replace his digital printer, reels of paper and machinery.

He maintained the stormwater inundated his shop hours before the creek broke its banks.

Mr Rixon said he was considering legal action.

"I can't start from nothing, I am in my early sixties," he said.

"For an insurance company to turn around and do this — to affect the livelihood — they've got no consideration for anyone except the bottom dollar."

Payouts could lead to higher premiums: IAG

Executive general manager Cheryl Chantry said IAG experts have found water inundated properties in Picton in different ways.

"Some properties were impacted by about 10 centimetres of water that came through, but others were impacted by up to as much as 400 millimetres," Ms Chantry said.

"But the impact of that initial water that has come through with damaging things like floor coverings, the walls, commercial equipment. A lot of that equipment will be covered and a lot of that damage to the building will be covered," she said.

Extending claims outside the policies provided to customers as a goodwill gesture would potentially lead to higher premiums, according to Ms Chantry.

"It's really important for us to make sure that we understand the nature of the water that's come through," she said.

"From an affordability perspective it is important to make sure that insurance is sustainable long-term.

"We really do need to focus on understanding the nature of how the damage has been caused and what is covered under the policy."

Last week the ABC revealed inconsistent rulings by insurers in assessing how Argyle Street shops were inundated by stormwater or flooding from Stonequarry Creek.

Suncorp, which includes the brands AAMI, Vero, Resilium and GIO, has determined that the event was covered under the "storm" section of customers' policies.

QBE made the same determination and is settling claims.