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Mitigation message falls on deaf ears

For years the insurance industry has been united in its message to governments on disaster funding: investing in mitigation now saves more later.

Simply picking up the tab after the devastation hits does no favours to anyone, and it’s time for a different approach.

But apparently the message is not getting through.

In May 2015 the Productivity Commission published its report on natural disaster funding arrangements. It made a number of recommendations, including spending $200 million a year on disaster resilience and mitigation measures.

The Federal Government has now published its response – and declines to commit to increased mitigation spending. It “does not propose to pursue these recommendations at this stage”, and it points to $26.1 million invested annually under the National Partnership Agreement on Natural Disaster Resilience.

The insurance industry is again united in pointing out this simply isn’t enough.

The Insurance Council of Australia (ICA) says natural disasters already cost the economy $9 billion a year, according to Deloitte Access Economics, and the Government’s “modest” measures will not stop that figure soaring to a predicted $33 billion by 2050.

“ICA continues to urge the Federal Government to significantly boost spending on mitigation,” a spokesman said.

“As the impact of climate change becomes more acute, higher spending on physical mitigation will be essential to protect lives and property, and reduce the vastly higher sums needed to repeatedly rebuild homes, businesses and infrastructure.”

The National Insurance Brokers Association agrees. CEO Dallas Booth told mitigation is the “only way” to keep claims costs down and premiums affordable.

“It’s just common sense given the nature of Australia and the disasters we face,” he said. “Whether you think climate change is caused by humans or not, our changing weather and the impact on communities is real.”

Mr Booth says the issue is complicated by the fact it affects three different levels of government.

“Governments work pretty well in their own little silos, but not so well when the issue cuts across all levels,” he said.

“This requires strong leadership through the Council of Australian Governments. We know there are budget challenges, but the value of mitigation funding has been proven time and again.”

The Australian Business Roundtable for Disaster Resilience & Safer Communities – led by the CEOs of IAG, Munich Re, Australian Red Cross, Investa Property Group, Optus and Westpac Group – believes the Government’s response falls well short.

It says that “more work needs to be done, particularly in the area of funding for disaster resilience and mitigation”.

It says 97% of disaster funding is spent on post-event recovery, with only 3% on mitigation. 

IAG CEO and MD Peter Harmer says the Government has made some progress, but the overall result is disappointing.

“We have heard from policymakers, ministers and even the Prime Minister himself that we have the funding mix wrong – we spend too much money after disasters hit and impact Australian lives,” he said.

“The roundtable has repeatedly called for changing the approach to natural disaster funding.

“We have identified that carefully targeted investment in preventative infrastructure of $250 million per year would reduce recovery costs by 50%, generating economic savings of $12.2 billion by 2050. Too often the community impact from a natural disaster is too great.

“Why don’t we dig a little deeper today to save life, property and money tomorrow, and help prevent these unsustainable costs from occurring in the first place?”

It’s a very good question, and one the Government has singularly failed to answer.

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