As the clean-up from recent natural disasters continues around the country there are calls from brokers for a frank discussion about disaster planning and disaster recovery funding.
Lea Insurance Brokers chief executive Dennis Keating says the recent repeated flooding in Queensland highlights the need to openly discuss insuring people who live in areas that are disaster prone.
“There needs to be a serious discussion about how we respond to claims from people who live in areas that face regular disasters. We have people living on flood plains with insurers told to provide cover for floods but no-one is tackling the issue at a bigger level,” Keating says.
“At the same time it is likely some premiums will go up with some people either choosing to pay for less cover or opting out all-together because they can’t get reasonably affordable coverage.”
“The tough question we have to face is ‘how do we prevent disasters?’ because we know from history that what has flooded in the past will flood again.”
However Keating says the recent national disasters including fires in the south-eastern states demonstrates this is a national discussion.
“At present the focus is on Queensland but people forget the biggest claims events are things like hail storms that have hit cities in Victoria, NSW and Western Australia.”
Northwest Insurance owner David Coe says the recent disasters also highlight the need for a national fund to deal with natural disasters across the country.
“Since the introduction of the Terrorism Insurance Act in 2003 everyone has been paying a levy but there have been no claims in Australia. As such the levy funds must be fairly high,” Coe says.
“It would make more sense to use these funds to start a national disaster levy – which would not be event or location specific – for the benefit of the nation. The levy could be capped and applied to some commercial and personal insurance.”
A similar scheme has been suggested by Queensland Federal Member for Parliament Warren Entsch who states the Federal Government should underwrite disaster insurance to reduce premium costs in disaster-prone regions.
Enstch, the Member for Leichhardt in far-north Queensland told the ABC that similar schemes exist in Thailand, Japan and New Zealand and have resulted in affordable insurance premiums for home owners and small businesses.
The scheme would be funded via a levy and used to help insurers negotiate cheaper rates with re-insurers while also providing for the first $500 million in damages in the event of a natural disaster.
Such a scheme was recommended by the Natural Disaster Insurance Review which was ordered by the Federal Government following the 2011 flood. One of the NDIR’s recommendations was a government-backed reinsurance facility to address this issue.
Federal Minister for Workplace Relations, Financial Services and Superannuation Bill Shorten also told the ABC that the idea was under consideration but there were concerns that such a scheme may create market distortions.