Insurance Council of Australia

Affordability

NSW Government action on Sydney floodplain development welcome

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NSW Government action on Sydney floodplain development welcome

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News release

Sunday, 29 October 2023

The Minns Government is to be commended for its decision to halt further development in parts of Sydney’s north-west due to flood risk, the Insurance Council of Australia (ICA) said today.  

This decision announced today in The Sunday Telegraph by Minister for Western Sydney Pru Car and Minister for Planning Paul Scully is clear and strong action that will protect families and businesses from future dangerous flood events. 

This is the first tangible decision by a State Government in response to the agreement by National Cabinet in 2022 that “the days of developing on floodplains need to end”.  

It follows advocacy by the ICA and other peak bodies such as the Planning Institute of Australia and Master Builders Australia for governments responsible for land use planning decisions to significantly strengthen the controls around developments on high-risk flood plains. 

Some residents of Western Sydney have experienced flooding four times in the past three years and the region is one of the most flood-prone in Australia.  

Quote attributable to ICA CEO Andrew Hall:  

“The Minns Government should be commended for taking such a critical decision which will put the safety and wellbeing of future Western Sydney communities first above all other demands. 

“This is a significant shift in thinking about how we make the region safer and improve its risk profile. 

“Insurers appreciate that Sydney is grappling with a housing crisis as the population surges, but repeating mistakes of the past through poor planning decisions would only condemn future generations to trauma and financial loss through devastating flood events while placing further pressure on all insurance premiums. 

“Western Sydney already is one of Australia’s most exposed and high-risk flood areas, due to the topography of the Hawkesbury Nepean basin.  

“To have allowed developments to proceed in these areas in full knowledge of the flood risk would have been unforgiveable. 

“It was never a question of whether these areas may flood; the science, data and modelling show we know they will flood – to put further housing in these areas of unmitigated flood risk would have been a terrible strategy.” 

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New data shows historic catastrophes would have greater impact today

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New data shows historic catastrophes would have greater impact today

News release

Wednesday, 12 September 2023

New data released by the Insurance Council has revealed that the cost of both the 1999 Sydney Hailstorm and Cyclone Tracy would far outstrip last year’s record-breaking flood if they happened today.

  • The Sydney Hailstorm, which caused $1.7 billion in insured losses when it rained cricket-ball-sized hailstones on the city in April 1999, would result in an estimated $8.85 billion in insured losses if it happened in 2023.
  • Cyclone Tracy, which killed 71 people and caused $200 million in insured losses when it struck Darwin on Christmas Eve 1974, would cause an estimated $7.4 billion in insured losses in 2023.
  • The 2022 South-East Queensland and New South Wales Floods cost $6 billion in insured losses and remain the costliest extreme weather event in our history.

The new data, calculated by Australian catastrophe modelling firm Risk Frontiers, uses methodology that normalises the losses of past insurance catastrophes to account for inflation, changes in property numbers and values, and stricter building codes, enabling insurers, reinsurers, governments, and other policymakers to better understand the likely impact of future extreme weather events.

The changes in estimated insured losses for the historic events is due to the increase in people and property across Australia, particularly in large population centres, underscoring the need for greater investment in measures to make at-risk communities more resilient to extreme weather.

Risk Frontiers has also provided updated data on historic insurance catastrophes adjusted for inflation only, allowing a comparison of actual insured losses from events over the last half century.

The new data is included in the ICA’s annual Insurance Catastrophe Resilience Report, which also examines the most pressing issue currently facing the Australian insurance industry and its customers – affordability and availability – and the clear link between risks and costs.

The report calls for increased investment in resilience and mitigation measures as part of an ongoing program to reduce risk and cost pressures, the end of development on floodplains, the broadening of home buy-back schemes to move people out of danger, improved building codes to make buildings more resilient, and reform of state taxes on insurance products to provide immediate cost relief.

Comment attributable to Insurance Council of Australia CEO Andrew Hall:

The financial impact of insurance catastrophes over the past 12 months was around one fifth of the cost of the previous record-breaking year, but more benign weather conditions should not provide false hope that the issues of worsening extreme weather risk have gone away.

This new data shows that when – not if – extreme weather events strike large population centres in the future we can expect them to have a greater impact and be more costly, making the case for risk mitigation even more pressing.

We can’t wait until disaster strikes, we need to act now by investing more to make communities more resilient, reform land-use planning and building codes and, in some cases, move people and homes out of danger altogether.

Read Full Report here

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ICA Statement – 19 August 2023

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ICA Statement - 19 August 2023

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Saturday 19 August 2023

Insurers paid out $36.5 billion in claims last year, helping millions of Australians recover from the unexpected. Insurers are committed to ensuring products and services provided to customers are of a high standard and are consistent with regulatory obligations and community expectations.

Because of a series of very significant extreme weather events since the Black Summer bushfires the sector and its customers have experienced several very challenging years. In 2022 alone, there were more than 300,000 disaster-related claims lodged from four declared insurance events across the country, costing more than $7 billion in insured losses.

At the same time, in response to the Financial Services Royal Commission insurers have upgraded systems and processes and improved the way they engage with customers. This has resulted in better capacity to address customer issues and work more closely with regulators in ensuring improved customer outcomes.

We acknowledge there is more work to be done, which is why in April we commissioned Deloitte to undertake an independent review of how insurers responded to last year’s floods. This review predated the recently announced Parliamentary inquiry and will feed into that process, which we look forward to participating in.

Given the critical nature of insurance, it is vitally important that Australia has a robust and profitable insurance sector to help families, businesses, and communities get back on their feet.

Insurer profits are cyclical and often impacted by factors outside of the control of the businesses, including extreme weather events. Insurers faced historically low profits in 2020, 2021, and 2022, and recent improvements in profitability, largely due to a significant turnaround in investment returns and improvements in some commercial lines, should be seen in that context.

Persistently high inflation and significant increases in reinsurance costs are continuing to increase costs for insurers into 2023. Home insurance is under particularly significant pressure – for every dollar collected in home premiums in 2022 insurers' costs were $1.04.

The sector has appreciated the opportunity to work more closely with ASIC to develop a clearer understanding of their view of specific obligations for general insurers. We note that the recent interim stop orders on some lines of pet insurance were in place for less than 24 hours, following immediate engagement from affected businesses with ASIC to make amendments to certain documents. The sector was pleased to see these interim stop orders lifted so quickly.

Insurers must carefully calibrate costs through volatile weather periods to ensure the product remains in reach of as many Australians as possible. We note ASIC’s recommendation on resourcing and will engage further with the regulator to understand what level of permanent claims staffing they consider appropriate, given that any ongoing increase will be a cost that is ultimately borne by customers.

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‘Find a fairer way’ to fund NSW emergency services

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‘Find a fairer way’ to fund NSW emergency services

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News release

Monday, 13 February 2023

Home insurance customers in NSW will see a reduction of around 15 per cent in their annual premium costs if the next State Government removes the Emergency Services Levy (ESL) and finds a fairer way to fund emergency services, a new report from the Insurance Council of Australia (ICA) finds today.

Released in the lead up to next month’s state election, A Stronger NSW finds that because of the ESL NSW insurance customers are paying nearly three times the amount of state taxes than Victorian insurance customers.

This is contributing to an estimated 13 per cent of NSW households being uninsured – double the rate in Victoria.

NSW is the only mainland state that still funds emergency services by applying a levy on insurance, which is currently adding around 18 per cent to home insurance premiums and up to 40 per cent to business cover.

To support its call for reform of the ESL, a state-wide advertising campaign commences today calling on the next NSW Government to “find a fairer way” to fund emergency services and bring NSW in line with every other mainland state and territory.

This campaign is backed by new research conducted for the Insurance Council which shows that almost two-thirds of NSW voters (65%) support removing the ESL and replacing it with an alternative funding model for emergency services.

In addition to reform of the ESL, A Stronger NSW outlines eight other policy recommendations for the next NSW Government to reduce risk and put downward pressure on the cost of insurance in the State:

  • Prevent the development of new homes in high-risk areas by reviewing land use planning arrangements based on water catchments
  • Protect homes and communities by investing in measures such as community infrastructure, improved flood early warning systems and home retrofit programs
  • Design and construct stronger homes by including the principle of resilience in building standards
  • Reform written-off vehicle rules for sustainable car insurance and to promote supply of second-hand vehicles
  • Accelerate the transition to electric vehicles by ensuring homes are EV ready and addressing skills shortage in EV repair
  • Review current tort law and civil liability settings to increase insurance affordability and availability for small businesses
  • Remove unfair insurance requirements from government contracts
  • Enable households, communities, government, and agencies to better prepare, protect and respond to disasters through improved and consistent data standards

In 2022 NSW suffered $3.3 billion in insured losses from 150,100 claims relating to extreme weather events, the majority of which came as a result of the February-March floods which cost almost $2.9 billion in insured damages across the State.

Quote attributable to ICA CEO Andrew Hall:

The policy recommendations outlined by the Insurance Council today in our A Stronger NSW report will drive action on reducing risk and addressing the critical issue of insurance affordability and availability in NSW.

The abolition of the emergency services levy is key to this: the next NSW Government must find a fairer way to fund emergency services without having the burden fall directly on insurance policy holders.

At a time when adequate insurance cover is more important than ever, home insurance customers in NSW are paying the most tax in Australia and this is leading to lower levels of insurance when compared to other states.

The NSW emergency services levy weakens our collective capacity to recover from natural disasters and increases the burden on NSW taxpayers for financial relief.

We encourage whoever wins the NSW election in 40 days’ time to urgently take up this and the other eight policy proposals to reduce risk and improve insurance outcomes in the State.

For further information go to: www.findafairerway.com.au

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