Insurance Council responds to minister's brazen challenge to lower premiums

Insurance Council responds to minister's brazen challenge to lower premiums | Insurance Business Australia

Insurance Council responds to minister's brazen challenge to lower premiums

At the Insurance Council of Australia's (ICA) annual conference earlier this month, Murray Watt, the Minister for Emergency Management offered up a direct challenge to insurers. During his speech to the industry, the Minister called on insurers to lower premiums for customers in disaster-prone regions.

“[The] government is doing what insurers told us was needed – a significant increase in mitigation investment,” Watt said at the conference, as reported by The Guardian. “Now, we expect the insurance industry to fulfil its end of the bargain.”

What does the ICA think of the Minister’s somewhat brazen demand?

Read more: Insurers called to lower premiums for customers in disaster-prone areas

Without directly answering the Minister’s challenge, the ICA’s CEO Andrew Hall (pictured above) suggested that action to strengthen resilience, like the government’s investment, can reduce premiums.

“We know these measures can help to lessen the impact,” said Hall, referring to the federal government’s Disaster Ready Fund (DRF) to improve community resilience, announced in September. From July next year, the DRF will provide up to $200 million annually to build disaster resilience and mitigation projects across Australia.

“Managing and reducing risk at a community and property level throughout Australia is critical, so it was very positive to hear Senator Watt reinforce the federal government’s commitments under its Disaster Ready Fund to improve community resilience,” said Hall.

Hall said this investment will make a real difference to protecting communities exposed to extreme weather risks, particularly floods.

“It will not only save lives and livelihoods but provide additional benefits such as making insurance as affordable as possible,” he said.

During his speech, Watt discussed the effect of mitigation work in Roma, western Queensland, noting that “before 2015, if anyone as much as spat upstream of the town, it would flood, with homes facing more regular inundation with premiums that rose with every event.”

However, Watt explained that constructing a $15 million flood levee to protect 483 homes and 75 businesses resulted in an average of 34% reduction in insurance premiums.

“Now, as we build these new projects under the Disaster Ready Fund and buyback homes in the Northern Rivers and South-East Queensland, we need to see the same outcome,” he said.

Hall used the same example after acknowledging that for insurers “to continue to provide insurance coverage at affordable pricing,” action is required to strengthen resilience.

“We know these measures can help to lessen the impact,” he said. “For example, following the construction of a flood levee in Roma, Queensland, premiums dropped by an average of 34%.”

Hall said the ICA and insurers “stand ready and willing to work with the government” on where land planning use should be reviewed and building standards improved to include resilience.

This month, the ICA released a climate change roadmap to help insurers achieve net zero emissions for their operations by 2030 and across their activities by 2050. “Towards a Net Zero and Resilient Future” received strong support from Australia’s insurers, including Allianz, Zurich, and Suncorp.

“By using this roadmap, insurers can play their uniquely important role in limiting the consequences of climate change, at the same time reaping the rewards of the massive economic shift that’s taking place right now and that will only grow in coming decades,” said Hall.

Read more: Does the ICA's climate change roadmap go far enough?

The ICA’s roadmap suggests various measures to help insurers achieve net zero for their operations by 2030, including investing in energy efficiency, rooftop solar for office buildings and transitioning corporate fleets to electric

Meanwhile, thousands of residents have evacuated their homes as western NSW continues to suffer severe flooding. According to an ABC News report, residents in Molong and Eugowra were told to move to higher ground as evacuation was no longer possible.

By Tuesday, the Lachlan River is expected to peak at Cowra at nearly 14 metres with major flooding.

Meanwhile, the NSW State Emergency Service has said it is currently undertaking the largest resupply mission in its history. The NSW SES is working to resupply communities isolated by flooding in Collarenebri, Walgett, Lightning Ridge, Goodooga, Brewarrina and parts of Bourke.

“The size of the area is about 40,000 square kilometres – more than half the size of Tasmania,” said NSW SES assistant commissioner Nicole Hogan.

On Monday morning the NSW SES reported responding to more than 450 calls for help and making 33 flood rescues in 24 hours.