Rain continues to fall on the NSW mid north coast where thousands of people are cut off by water and dozens have needed rescuing from rooftops. Taree and Coffs Harbour are among the most impacted towns where insurers can expect significant claims numbers.
Residents have described “unprecedented” water levels and several people are reported missing.
The Insurance Council of Australia (ICA) has declared a Significant Event and advised that the flooding may be escalated to an Insurance Catastrophe.
Insurance challenges for brokers and property owners include flash flooding risk and damage to homes and properties caused by prolonged water exposure. The ongoing wet weather started a week ago.
“Rising flood waters will damage the property, rainfall can lead to water ingress through the roof and potentially other points in the home,” said Vicki Mullen (main picture), senior consultant at the consultancy firm, Finity.
Sydney-based Mullen has also worked in senior roles at the ICA, the Actuaries Institute and for several insurers. One of her specialties is climate risks.
She said if water ingress damage is not addressed promptly it can cause mould.
“Mould can render a home uninhabitable,” said Mullen.
Another issue with these damage claims, she said, is the length of time they can take. This is partly because an insurer needs to decide if the damage is caused by wear and tear or the event itself.
“Claims for damage due to water ingress due to insured events such as storm/rainfall can take time to assess due to the potential application of policy exclusions,” said Mullen. “This can lead to delays in assessing claims and commencing repairs – if the claim is accepted.”’
ICA data shows that flood events are Australia’s most costly natural disaster. However, industry stakeholders say flood resilience efforts lag behind initiatives to reduce other nat cats like cyclones and bushfires.
The ICA is trying to change that with its proposed Flood Defence Fund (FDF). The call for a $30.15 billion government investment over 10 years aims to protect the country’s most at-risk catchments in Queensland, New South Wales and Victoria.
“I think the ICA is right to focus on flood risk,” said Mullen. “We certainly welcome their proposals for a flood defence fund and other measures to improve resilience to flood, including better data and information for consumers.”
She also mentioned the Hazards Insurance Partnership (HIP).
“We feel that, as an industry, whatever we can share with government that we know are the risks in this country, governments will be getting a much deeper insight into where the challenges are,” said Andrew Hall, CEO of the ICA recently.
The idea of HIP, said Mullen, is to co-ordinate risk mitigation between governments and insurers and determine the most effective mitigation activity for communities and individual homes.
“Now that the election is over, we hope to see the HIP invigorated and begin to publish results,” she said.
Mullen said the Resilient Building Council’s (RBC’s) Multi-hazard Disaster Resilience Ratings Scheme is also rolling out. Bushfire ratings are available for property owners via a free app.
“Many insurers have already agreed to recognise certified ratings in their pricing,” said Mullen. “I’m excited by the RBC’s work because it doesn’t just inform you about the risk, but helps you take steps to reduce your risk.”
Meanwhile, property insurance affordability and availability issues continue. Flood coverages are particularly impacted.
“Last year we noted that 15% of households faced home insurance premiums that would cost more than one month worth of gross household income,” said Mullen. “That’s a growth of 50% since 2022.”
This data, compiled by Finity, came from the latest Actuaries Institute Home Insurance Affordability Index.
The consultancy firm also shared its data on insurance premiums for residential buildings in Sydney suburbs over the last five years. The figures showed dramatic premiums increases.
For example, building insurance in the Waverley and Woolhara Council area has increased by more than 75% to about $4,500 per year. In the flood impacted Hawkesbury area, premiums have increased by 72% during the last five years to more than $7,000.
“Homes exposed to flood risk have seen the largest increases in premiums over the last five years,” said Mullen. “This is partly due to insurers improving their ability to understand risks at a property level, as well as increasing reinsurance costs faced by insurers.”
Are you an insurance broker on the mid north coast? What flood related challenges are your clients currently dealing with? Please tell us below
