What brokers need to know about bushfire areas

Once the smoke had cleared and the embers cooled after the bushfires across the Blue Mountains and surrounding areas late last year, many property owners found themselves in for a rude surprise.

Even those who were insured faced gaps of $100,000 or more between their sum insureds and their actual rebuilding cost, thanks to the relatively new Bushfire Attack Level (BAL) national ratings system. Broker-turned-consumer advocate Kate Fairley, Director of Get Informed, ran an outreach program for victims of the fires, helping inform them about their insurance and claims options.

She says she saw the frustration of victims first-hand at a community meeting.

“There was plenty of anger at that meeting. Why? Because although the victims had some financial cover, it was dawning on some of them that it was not enough to re-build what they had thanks to building standards such as Bushfire Attack Level (BAL) ratings,” she says.

“Those who had over-insured their homes, once they got over the sadness and shock of their loss, actually found themselves in quite a good position, considering their circumstances. They could re-build to a higher quality than they could ever have dreamed of before the fires.”

Tightened regulations

Those BAL ratings are a series of six risk definitions, ranging from ‘Low’ to ‘Flame Zone’, applied to buildings after an analysis of various factors such as proximity to vegetation, slope of land, chance of flame contact etc.

They have been developed into Australian Standards around the construction of buildings in bushfire-prone areas and are enforced by local councils.

Bushfire risk assessor Bruce Macarthur, director of Budget Bushfire Attack Level Assessment, says the BAL ratings were introduced after the Victorian fires in 2009.

“Almost every council in NSW is required by law to have maps available of bushfire-prone land in their regions,” Macarthur says. “Any building within these areas, including any form of external renovation or external alteration that would usually require council approval, requires self or independent BAL assessment, depending on the circumstances.”

The biggest lesson from the NSW bushfires is that the vast majority of home owners were underinsured.

Why is this of interest to brokers? It means re-building a house, thanks to the many new regulations, will likely cost considerably more than it would have prior to the ratings being in place. Fairley says the building sum insured should be equivalent to the cost of the re-build plus the additional costs to comply with regulations.

BAL ratings heavily influence what types of materials must be used in a build as well as what types of standards must be adhered to, from the glazing to the walls to the roof. They can influence the distance the building must stay from surrounding vegetation and the footprint of the building itself.

 A broker’s role

“Brokers need to know about all such issues,” Kate Fairley says. “They need to keep up with changing legislation to ensure their clients really are covered. Most insurance policies will allow people to over-insure their homes.

“Some policies contain wordings that allow for safety nets – a certain amount goes towards a rainwater tank or a solar hot water system [also now compulsory in many council areas] or towards meeting requirements of statutory authorities in connection to re-builds or repairs, for instance.

“The biggest lesson from the NSW bushfires is that the vast majority of home owners were underinsured. While a broker can’t tell you how much to insure your home for, they can sell you a product which has some nice little safety nets specific to your needs. Brokers need to be aware of issues such as BAL in order to responsibly illustrate these specific needs to their clients.”

BAL Ratings explained

Every build in a bushfire-prone zone must have a Bushfire Attack Level (BAL) assessment carried out. For a BAL calculator, visitwww.balreport.com.au The result will be one of these ratings.

BAL-Low

Minimal chance of attack by radiant heat and flames. Requirement for basic property preparation.

BAL-12.5

Significant chance of attack by burning debris, such as embers, and radiant heat levels. Some specific construction requirements.

BAL-19

Significant chance of attack by burning debris, such as embers, and increased radiant heat levels, threatening elements of the building. Construction requirements to protect against such threat.

BAL-29

Significant chance of attack by burning debris, such as embers, and increased radiant heat levels, threatening building integrity. Some flame contact possible. Specific construction requirements to protect against such threat.

BAL-40

Increased chance of attack by burning debris, significant radiant heat levels, threatening building integrity. Potential flame contact. Specific construction requirements to protect against such threat.

BAL-Flame Zone

Radiant heat levels and flame attack significant enough to threaten building integrity and result in significant risk to residents. Building must be designed and constructed to withstand extreme heat and flame contact.