Cyclone mitigation still problematic in the north

The Northern Australia Insurance Premiums Taskforce’s final report might be in, but a senior north Queensland broker warns that serious socio-economic issues still need to be addressed if cyclone risks are to be effectively mitigated.

The Taskforce was established to explore the feasibility of options to lower insurance premiums in northern Australia, where the risk of cyclones has caused affordability concerns.

“The Taskforce formed the view that mitigation is the only sustainable way of lowering premiums,” Minister for Small Business and Assistant Treasurer Kelly O’Dwyer says.

“However, this is a complex area and the options canvassed in the report involve a coordinated response from insurers, governments and property owners.”

Acme Insurance Brokers Tully Director Karen Hardy says she believes there are several underlying social issues that still need to be addressed.

“I think the Taskforce has delivered a fair and balanced report, although it has not provided viable or affordable solutions to consumers,” Hardy says.

“I think it has missed its mark in that the people who can least afford to mitigate – our aged pensioners – are really being left in the lurch.

“Most people on an aged pension cannot afford to do any retrofitting or upgrading. And on the pension they can’t afford the insurance premiums either.”

One solution Hardy would like to see considered is increasing premiums in the south by 10%, so that premiums in cyclone-prone areas could be reduced by 20%.

Hardy’s other proposal is to set up a subsidised scheme for aged pensioners to retrofit pre-1980 homes to bring them up to code.

But, by and large, Hardy says the Taskforce’s final report delivered a win for brokers.

“If anything, this highlights the need for consumers to use insurance brokers who understand how insurance premiums are calculated,” she says.

“So I think this is a win for brokers. Because they are the people who know how it all works. And who is offering mitigation discounts.”

NIBA CEO Dallas Booth says that community resilience through mitigation is key to ensuring the affordability of premiums in disaster-prone regions.

“NIBA has been consistently calling for coordinated effort through the Council of Australian Governments for better planning, mitigation and resilience for severe cyclone and other natural disaster events in Australia.  Recent years have seen cyclones, storms, floods, fires and other losses,” Booth says.

“All levels of government have to take responsibility for doing whatever can be done to mitigate losses, make the community as resilient as possible, as this is the only effective way in which property insurance premiums will be able to be kept at affordable levels in future years.”

The final report was welcomed by insurer IAG, with Chief Executive Australian Consumer Division Anthony Justice saying its findings clearly show there is still a need to invest in a coordinated national resilience program.

“We believe if there is government intervention in Northern Australia, it should be focused on reducing vulnerability through land use planning, building codes and better funding for mitigation and retro-fitting,” Justice says.

“We also know greater information sharing that provides more access to data will give residents the opportunity to make more informed decisions and actively manage their risk.

“Our industry needs to do more to help residents understand their risks and how they can reduce them.”

Meanwhile, Suncorp has begun rewarding its north Queensland customers who undertake cyclone mitigation works with premium reductions of up to 20%.