Disasters demand co-operation

NIBA has urged governments to fundamentally reprioritise the spending on natural disasters, to shift from disaster response and recovery to management and mitigation.

In its submission to Productivity Commission’s inquiry into natural disaster funding, NIBA argued that governments have a joint responsibility to manage the risks and costs of natural disasters.

“Insured losses occur in the built environment, where governments and government agencies have an influential – and often controlling – interest in the nature, extent and level of development,” NIBA’s submission states.

“Most government activity relating to land use, planning controls and building standards occurs at the state and local government levels. However, the principal source of funding for natural disasters comes from the Federal Government to date.

“In these circumstances, NIBA respectfully submits that responsibility for the identification, assessment, management and funding of risks arising from natural disasters should be accepted as the joint responsibility of all levels of government. This would suggest an important, ongoing role for the Council of Australian Governments.”

NIBA’s submission also highlights that many premium increases are being driven not only by the growing size of insured losses but also advances in underwriting.

“The insurance industry is now using increasingly sophisticated data to determine the actual level of risk faced by individual properties,” it states.

“This means that insurers will be able to determine the relative risk of two properties adjacent to each other, based on their specific characteristics. Rating will no longer be done based on the postcode of the properties.

“The net result of these developments is that a combination of recent experience of loss in an area, together with high risk exposure (floor level close to ground, inadequate building standards, etc) can and will result in significantly higher insurance premiums than has historically been the case.”

NIBA argues the only way to keep premiums affordable is to lower the value of the potential losses.

“This can only occur is the risk of loss as a result of natural disasters is properly identified, assessed, managed and mitigated.”

To view the full submission, click here.