Q: What are the guidelines for declaring an Extraordinary Catastrophe?

A: The Code of Practice has a 4 month time frame for claims decisions, unless certain circumstances apply, for example, if a claim arises from an Extraordinary Catastrophe (see paragraph 78 of the Code).

The Insurance Council has developed the following guidance for use by the Board in determining whether an Extraordinary Catastrophe or disaster should be declared.

Relevant circumstances may include:

a. The number and frequency of recent declarations;

b. the impact or likely impact of a declaration on consumers and insurers;

c. the actual or potential financial impact of a declaration on consumers and insurers;

d. the extent to which insurers can or have taken reasonable steps to minimise the impact of the catastrophe or disaster on business operations;

The ability of members to determine claims may be materially affected in the following circumstances:

a. where infrastructure necessary to determine the claim has been damaged or destroyed;

b. where insurers are unable to gain access to an affected area;

c. where a significant increase in the number of claims is being experienced or is anticipated;

d. where it is unsafe for staff required to process claims to attend work premises (i.e. damaged buildings or pandemic);

e. any other circumstances considered to significantly affect the insurers’ claims handling capability as determined by the Board.

The ICA Board may consider the cumulative effect of multiple catastrophes or disasters when determining whether to declare an extraordinary catastrophe or disaster.  A declaration may apply to all Code signatory insurers or a specified insurer(s).  When making a declaration, the Board of the Insurance Council of Australia will provide reasons for its decision in line with the criteria outlined above.

Where an Extraordinary Catastrophe or disaster is declared, an insurer must continue to undertake best endeavours to process claims in timely manner.

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