A Senate report into the general insurance industry urges the Federal Government to reconsider investing at least A$200 million (US$157 million) a year in natural disaster mitigation and resilience measures.
The Senate Standing Committee on Economics report released on 10 August also recommends that, as a matter of urgency, the Australian government work with states and territories through the Council of Australian Governments to reform national disaster funding arrangements.
The government had previously rejected a recommendation for an increase to A$200 million a year in federal funding for mitigation and resilience, matched by the states and territories. The Insurance Council of Australia (ICA) has called on the Federal Government to allocate the funds for the purpose.
The committee also noted: “Rising premiums in home insurance, particularly in regions such as North Queensland, have been driven by sharp increases in claims volumes, higher claim amounts, and substantial increases in the costs associated with meeting those claims (e.g. repairing and rebuilding costs). These factors have largely resulted from a high number of major weather and natural catastrophe events over the past decade, including cyclones, storms, floods and bushfires.
“Insurers have revised their natural peril data following these events to more appropriately reflect the risk faced in regions where such events are more frequent, severe and costly.”
The Senate report was issued as the insurance tally for Cyclone Debbie, which lashed Australia in March-April, passes A$1.4 billion from almost 66,000 claims stretching from far north Queensland to northern New South Wales.
Insurance Council of Australia (ICA) CEO Rob Whelan said that the report concluded insurance premiums appropriately reflected the level of risk, and had also commended work undertaken by the ICA and its members to improve disclosure and pricing transparency to assist customers in making informed decisions.
“The ICA agrees the Federal Government should reconsider its response to the Productivity Commission. Investing at least A$200 million a year in mitigation and resilience should be treated as nation building that protects vulnerable communities for generations,” he said.
Last November, the Senate referred matters relating to Australia’s general insurance industry to the Senate Economics References Committee for inquiry. The terms of reference for the inquiry included exploring the increase in the cost of home, strata and car insurance cover over the past decade in comparison to wage growth over the same period; legislative and other changes necessary to facilitate an independent home, strata and car insurance comparison service in Australia; and any related matters, including natural disaster mitigation.