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Flood

Deloitte Report: The new benchmark for catastrophe preparedness in Australia

October 31, 2023 by insuranceca

Comprehensive review released into insurers’ response to 2022 flood

October 30, 2023 by insuranceca

Home Flood

Comprehensive review released into insurers’ response to 2022 flood

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News release

Tuesday, 31 October 2023

A comprehensive review of insurers’ response to Australia’s largest ever extreme weather event released today has set out seven areas for action by insurers and the Insurance Council of Australia (ICA) to improve responses to future events.

Commissioned by the ICA and undertaken by Deloitte, The New Benchmark for Catastrophe Preparedness in Australia report examined the operations of eight insurers who together received around 99 per cent of all home and contents, motor, and small business claims related to the floods that impacted northern New South Wales and south-east Queensland in February and March 2022, known as Cat 221.

The flood, which was the second largest insured event in the world in 2022, resulted in more than 240,000 claims with a total value of $6 billion, including $3.4 billion in home property claims, $710 million in home contents claims, and $304 million in personal motor claims. An additional 2,200 claims staff were employed by insurers in response to the flood.

Deloitte interviewed more than 80 staff across the eight insurers, reviewed more than 400 documents and significant quantitative data from all eight insurers, consulted more than 50 people impacted by the event including insurance customers and elected and local government representatives, and interviewed numerous stakeholders including regulators, reinsurers, reconstruction authorities, consumer groups, researchers, international experts, and businesses in the supply chain.

Key findings from the report include:

  • External factors made responding to Cat 221 particularly challenging, including a historically tight labour market, building materials constraints, the price and availability of new and used cars, and rental vacancy rates.
  • The scale of Cat 221 tested claims processes at a scale never before seen and exposed vulnerabilities in insurers’ claims and complaint handling responses, particularly in catastrophe planning, resourcing, processes and technology, communications, and governance.
  • Improvements have already been made by insurers as a result of lessons learned from Cat 221, but there is more work that can be done to continue to improve customer outcomes.
  • Claim closure rates varied considerably across insurers, however speed is not the only measure of insurer performance as other factors impacted closure timeframes, such as exposure to the event, policy definitions, and the mix of claims types.

The report presents seven recommendations for improvement, noting that not all recommendations will apply to all insurers to the same extent (detailed recommendations attached).

  • Preparedness - Insurers should improve their catastrophe planning, particularly their preparedness for extreme catastrophes like Cat 221.
  • Customer experience - Insurers should improve the customer experience during catastrophes through better communication with policyholders and by delivering a consistent experience through claim handling and complaints.
  • Resourcing - Insurers should redesign resourcing capability for catastrophe events, with a particular focus on workforce planning and resourcing and onboarding during catastrophes.
  • Operational response - Insurers should assess what operational efficiencies could be delivered in catastrophes through process, technology, and infrastructure investments.
  • Governance and transparency - Insurers should improve their ability to capture and leverage data and insights to understand the impact of internal and external factors on performance during catastrophes.
  • Coordination with government - More effective coordination between government and the insurance industry is required to provide faster access to government funding, consistent approaches to clean-up and debris removal, and co-incentivise investment in resilience and adaptation measures.
  • Code review - The Extraordinary Catastrophe definition in the General Insurance Code of Practice should be reworked as part of the upcoming independent review.

The Insurance Council has accepted all seven recommendations in-principle. The ICA will lead the work to improve coordination with government and will refer the recommendation regarding the Extraordinary Catastrophe definition to the upcoming review of the General Insurance Code of Practice.

An independent review of implementation progress will be undertaken in the second half of 2024.

Comment attributable to Andrew Hall, CEO Insurance Council of Australia:

The number of claims from Cat 221 was more than six times higher than the average received for catastrophes declared since 2016, so it’s not surprising that insurers were challenged in their ability to adequately respond to their customers.

However, insurers acknowledge there were failures of systems, processes and resourcing which impacted some customers as they progressed through their claims process, which was the driver behind the industry proactively reviewing its performance through this event.

The industry apologises to those customers for whom claims were not handled to the standard the industry strives to achieve, and we are working hard to better prepare for future extreme events.

The timing of this flood, which followed 12 insurance catastrophes since the Black Summer bushfires as well as the global pandemic, compounded insurers’ challenge, yet the industry is on track to finalise every valid claim, rebuild homes and repair communities, and remain prudentially strong.

This was in no small part due to the efforts of the thousands of people working hard in insurers’ claims departments, including the additional 2,200 staff employed by insurers to help deal with the surge in claims.

Australia has the conditions to underpin an insurance industry at the global frontier of extreme weather responsiveness.

Repeated exposure to such events, coupled with established disaster institutions and frameworks, means Australian insurers are well placed to show the world how to respond effectively and efficiently to extreme weather events. This will always need to be weighed up against the cost impacts and keeping insurance affordable.

Deloitte’s rigorous and thorough report provides a clear roadmap for insurers on ways in which meet this challenge and move forward on areas that have been identified for improvement.

The ICA will conduct a review on progress against the recommendations and report in the second half of 2024.

www.insurancecouncil.com.au/2022FloodReview

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NSW Government action on Sydney floodplain development welcome

October 29, 2023 by insuranceca

Home Flood

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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Insurance Catastrophe Resilience Report 2022-23

September 13, 2023 by insuranceca

New data shows historic catastrophes would have greater impact today

September 13, 2023 by insuranceca

Home Flood

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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Planners, builders and insurers unite to call for urgent planning reform

July 27, 2023 by insuranceca

Home Flood

Planners, builders and insurers unite to call for urgent planning reform

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News release

Thursday, 27 July 2023

State governments must urgently overhaul their approach to land use planning to ensure no more homes are built without regard to risk on flood plains, organisations representing planners, builders and insurers said today.

In response to the flood emergency of recent years, the Insurance Council of Australia (ICA), Master Builders Australia (MBA) and the Planning Institute of Australia (PIA) today, supported by the Australian Local Government Association (ALGA), convened the inaugural National Industry Roundtable: Land Use Planning and Resilience.

Around 60 experts from government, financial services, property, and community joined the discussion, which called on state and territory governments when thinking about future housing challenges, to urgently rethink planning rules so no more homes are built in high-risk flood-prone locations.

A communique from the three sponsoring organisations outlining recommendations for reform has been released and will be sent to planning ministers, who also met today to discuss this issue (communique attached).

The roundtable heard that all Australians are bearing the costs of worsening extreme weather events, and these costs are increasing because of historic planning decisions.

Attendees agreed that without reform, population pressures and inadequate planning laws will see further development of flood-prone land putting lives at risk, costing taxpayers billions of dollars in recovery and remediation, and adding to an already strained insurance sector.

Comment attributable to Andrew Hall, CEO Insurance Council of Australia:

The flood events of 2022, with almost 300,000 disaster-related claims costing around $7 billion, has driven up premiums and has resulted in affordability constraints for those at highest risk.

Without insurance, homeowners likely can’t access a mortgage, and that is the wrong direction for our country.

Today’s roundtable set out the actions governments must take to ensure future financial losses to homeowners, businesses and the community are avoided, and better government planning and investment is taken seriously.

Comment attributable to Denita Wawn, CEO Master Builders Australia

With a housing crisis at the forefront for many communities and a growing population, we must ensure that our planning laws are fit for the future and take an appropriate risk-management approach.

Governments are encouraged to take a balanced approach to development and resist a default of building out with alternative considerations such as building up to take the pressure off the housing system and supported with infrastructure that is more resilient and adaptable to extreme weather events.

Without fit for purpose planning laws technical building regulation will always fail. The housing industry needs clear and concise rules, that allow the industry to function and the community to have confidence.

Comment attributable to Matt Collins, CEO Planning Institute of Australia

Planning is a critical tool for influencing the level of future disaster risk, and our changing climate means we need to act now to limit the impact of extreme weather on our communities.

By adopting new risk-based policies and investing in better mapping and data, we can ensure development avoids or minimises exposure to flood hazards.

Australia’s town planners support governments taking clear action to ensure more climate-conscious planning systems, and this roundtable is an important step towards this goal.

Comment attributable to Councillor Linda Scott, President, Australia Local Government Association

Australia’s 537 councils play a vital role in building resilient communities, assisting in every corner of the nation to ensure our communities can better prepare for, respond to and recover from increasing natural disasters.

It’s crucial we rebuild damaged local infrastructure to a more resilient standard. Councils will continue to strongly advocate for ‘building back better’ to be a core value and overriding principle of joint state/federal Disaster Recovery Funding Arrangements.

On behalf of local governments, I look forward to attending the Planning Ministers’ meeting.

Media contacts

  • Insurance Council of Australia Kate Davies, Senior Manager Media and Communications – 0419 723 196
  • Master Builders Australia Dee Zegarac, National Director Media & Public Affairs – 0400 493 071
  • Planning Institute Australia Matt Collins, Chief Executive Officer – 0437 938 077
  • Australia Local Government Association Brad Watts, Media Adviser – 0418 415 649

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