Australian Insurers Vow More Effective Disaster Response

January 31, 2011

Australian insurers have reacted to the disastrous flooding in Queensland earlier this month with two new initiatives aimed at developing a more effective and sustainable response to disasters in Australia. They also stressed their opposition to mandatory flood insurance or a national insurance program.

The Insurance Council of Australia (ICA) released a “10 Point Plan to Tackle Disasters” and it named an expert panel of independent hydrologists to support policyholders and speed up the claims process.

ICA CEO Rob Whelan warned that “there is no simple, single solution to the flood insurance debate. It requires the development of a national policy approach to better deal with a number of challenges presented by floods in those communities at-risk.”

He called for a “meaningful national dialogue” with the government in order to develop “more effective and sustainable responses to disasters in Australia, specifically flood.”

The group set forth a 10 point plan with its priorities for engaging in those discussions.

  1. Standard definition for flood
  2. Improved disclosure
  3. Provision of adequate flood data
  4. Removal of insurance taxes
  5. Improved land-use planning
  6. Improve building standards
  7. Improve community infrastructure
  8. Education and financial literacy campaign
  9. Measure effectiveness of disaster relief payments
  10. Better advice to consumers

Whelan said he was reiterating the “position of the general insurance industry – that a flood levy may have unintended consequences – creating a moral hazard and encouraging fewer people to take responsibility for their own risks through purchasing appropriate insurance products.”

The ICA said it does not support mandatory flood insurance or a national insurance pool for natural disasters. “Both serve to distort the private sector insurance market and will result in people who have zero or extremely low levels of risk paying higher premiums to support those living in high risk areas,” the group said.

The ICA also stated that while it recognizes that disaster relief for the rebuilding of infrastructure is needed, this relief “should only be conducted hand in hand with reforms to encourage greater take-up of private insurance.”

The ICA noted that the independent hydrologists would work with local government flood plain managers and state agencies to provide greater transparency when assessing the nature of the flood as it occurred across the state.

“The independent Hydrologists Panel engaged by the ICA will prepare plain English reports describing the causes, nature and severity of flooding that has occurred in QLD. These reports will describe the inundation at a high level for each major town and region and will be made available to policyholders,” ICA said.

The insurance industry is funding the Hydrologist Panel at no extra cost to policyholders accessing these reports.

Source: Insurance Council of Australia

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