Australia has had more than its usual
share of natural disasters in 2021. Sudden events such as floods, fires,
earthquakes, cyclones, and hailstorms have been prevalent.
But what you think of as a disaster might
not be the same in the insurance sector.
When the Insurance Council of Australia declares
a catastrophe, it escalates and prioritises the insurance industry's response
to support policyholders impacted by the disaster in question.
An insurance
industry taskforce is established to identify and address insurance
related issues arising from the natural disaster
- Why is a declaration important?
- A catastrophe declaration means:
- Claims from
affected policyholders are given priority
- Claims will be
triaged based on urgency, so the worst affected are assisted first
- The ICA's
disaster hotline is activated to assist policyholders with questions about
their insurance
- ICA disaster
response specialists are mobilised to the affected location to work with
stakeholders, including government agencies, emergency services, local
agencies and affected policyholders
- Insurers
mobilise their disaster response specialists to assist their affected
customers with claims and assessments as soon as declared safe by
emergency services
Once the
council declares it, urgent assistance goes to those worst affected, insurers
mobilise extra staff to work with local agencies and on claims, and disaster
response specialists can go and assess claims. As well, insurers should resolve
claims within four months. That's according to their voluntary commitment to
theGeneral Insurance Code of Practice.
We'll recap five declared catastrophes
that happened in the last year or so. They've led to a total of $2.28 billion claims
against insurers, with just under a quarter unresolved as of the end of
October. There were almost 134,000 claims, with the average at $17,000. Most of
the claims were related to property losses or damage, with a small proportion
for contents, motor vehicles and interruption. Nine in 10 claims were personal;
the rest were commercial.
2020 Halloween hailstorm
The Halloween hailstorm that ravaged
southeast Queensland in 2020 was declared a catastrophe the very next
day. Insurers incurred a total of $1.08
billion from 44,000 claims, with 88% of them closed by October this year.
Perth Hills bushfire
Meanwhile, the Perth Hills Bushfires in
February resulted in 1,100 claims lodged worth a total of $88,000,000. The
fires burnt for several days just 200 claims are outstanding as of October.
East Coast storms and floods
As well, NSW, Queensland and Victoria
suffered extreme weather, including storms and floods over several days in
March. Insurers incurred 57,000 claims totalling $645 million, of which 13,000
are still outstanding. Interesting to know the Insurance Council only declared
an emergency when more than 5,000 insurance claims were lodged.
Cyclone Seroja
In April, tropical cyclone Seroja hit
parts of Western Australia, including Kalbarri and Northampton. It severely
damaged roads, electricity, homes, businesses and communications across several
communities in that state. About 7,100 claims were lodged, totalling
$306 million in total. As of October, 2,800 claims were yet to be resolved.
Victorian storms and floods
Significant storms and flooding impacted
regions of Victoria in June. About a quarter of the 28,000 claims incurred had
been resolved by October. The total value of claims made was $241 million.
Time is of the essence
Even though insurers give priority to
catastrophe-related claims, you can see there is a lag. That's despite a triage
process to source urgent help for those property owners worst affected.
The Insurance Council says COVID-19 border
closures had severely hampered responses to disasters. In its Insurance Catastrophe Resilience Report 2020-21, the council says to improve
responses Australia needs:
- More funding
for public and private disaster mitigation projects
- Improving
building standards and quality
- Making better
informed land-use planning decisions.
Those policy and system changes will take
time to take effect. Now international comparative research shows
climate-change-induced higher temperatures can lead to storms becoming more
intense, severe and lead to higher economic losses. By 2060, the bill for
climate-change-related disasters will reach $1.2 trillion annually, according
to Deloitte Access Economics.
It's good to know that having us on your
side can help navigate the claims process should you face a natural disaster.
There's a lot you can do to avoid financial devastation due to natural
catastrophes. Talk to us about improving your risk management strategies.
Insuring against such disasters is just part of your toolkit. We'll help you
protect yourself, assets and livelihood better.
This content is created and provided by Finnigan Investments (Australia) Pty Ltd trading as OneAffiniti on behalf of Austral Risk Services, and is for commercial purposes. Any financial product advice in this content is provided by Austral Risk Services AFSL No. 244369. This material is general in nature and has been prepared without taking into account your objectives, financial situation or needs. Accordingly, before acting on it, you should consider its appropriateness to your circumstances.