I see your point, but I must disagree with the idea that there are plenty of other places to build, because there really aren't, in some other countries maybe but definitely not here in England. The county councils (they're the people who ultimately decide what gets built and where) are really struggling as it is to find new places for housing estates and despite the massive need for new houses. Why? Amongst other things there just isn't enough space. Sure, there are a lot of fields, but the vast majority are being used for farming. As it is the UK doesn't produce anywhere near the amount of food required by the population, one of the major things affecting our economy is the sheer amount of products that we have to import. Also, I realise that some areas flood every year, but there are few built up places like that in the UK.
And then we have the problem that an entire city isn't going to move because of flooding. There is no such thing as a new city in the UK, many of them are hundreds of years old. Why is San Francisco on a fault line? Simply because whoever established it didn't realise it was a fault line and now it'd cost $billions to do anything about it at this stage, now that it's as well established as it is. And then of course there's just stubborn people, as you said.
I understand from a business standpoint why an insurance company wouldn't take the risk of covering someone who's guaranteed to make a claim, but when you get your insurance package that advertises flood damage cover, and your paying the same as other people who will actually get the cover, it can be a bummer to find out that the contents of that package varies depending on where you live, although the price does not. You are paying them for something they have no intentions of providing, meanwhile they're happily selling it to people that don't live on a flood plain and will never actually get flooded.