Bushfire underinsurance – a threat and maybe an opportunity
Large insurance companies do the big things well. It’s usually the little things – the stray claim, the silly decision that seemed like the best idea at the time – that let them down.
Over the next week or so the industry will come under unprecedented scrutiny as it begins to deal with the victims of the Victorian bushfires. As affected areas are opened up to loss adjusters, the cheques will be flying.
Prime Minister Kevin Rudd, who has taken a strong personal interest in the welfare of the bushfire victims, used a speech in Parliament last week to warn insurance companies not to hold up claims from victims of the Victoria bushfires – and the Queensland floods.
Assistant Treasurer Chris Bowen also let it be known he’d told the Insurance Council the Government expects companies to “act promptly”.
Mr Rudd also urged people “experiencing problems with their insurance companies” to contact the Government.
Opposition Leader Malcolm Turnbull weighed in with a suggestion that a “commissioner for disaster insurance” should be appointed to oversee the response of insurance companies to the Victorian bushfires and Queensland floods and act as an advocate for the victims.
None of that was particularly positive for an industry that has shown it’s well organised and prepared to do its job.
But then the major problem that’s likely to rear its ugly head in the bushfire zone won’t be shoddy claims work or unsympathetic insurers – it’ll be the high level of underinsurance. (At least if there’s no insurance at all there’s not going to be a fuss – even if government and community generosity allows the homes of the uninsured to be rebuilt.)
Insurance Council studies in 2007 showed 23% of Australian households have no insurance at all, while up to 81% of those who are insured will be more than 10% shy of the true rebuilding costs.
It will be interesting to see how the Victorian and Federal governments react when the level of underinsurance in the bushfire zone becomes apparent.
The industry has not attempted to raise the issue of underinsurance in relation to the bushfire victims, but not even the Prime Minister can expect insurers to pay more than the policy allows.
Hopefully the insurers will be well prepared to shove the blame for high levels of underinsurance where it belongs – at the Victorian Government, which has taxed insurance to such ridiculous levels it has pushed it into the realms of unaffordability for many people just like the fire victims.
Many of them were living in the bush on the outer fringes of Melbourne because the land was cheaper than the city.
Premier John Brumby, who has always taken a hard line on retaining the fire services levy and other taxes on premiums, has announced a royal commission into the bushfires. It’s a brave move for the very cautious Mr Brumby, because he has ignored the old political dictum that you don’t call a royal commission without knowing what it will say.
But it would be a small miracle if he was prepared to see the issues of fire brigade funding and the state’s role in making insurance unaffordable included in the terms of reference.
Mr Turnbull has made the point that it could take years for the Victorian royal commission to report, and has suggested the Federal Parliament should conduct its own inquiry.
There must be some hope that the aftermath of the Victorian bushfires will encourage greater political and community understanding of the essential nature of insurance and the need for government policies that encourage people to buy it rather than carry the risk themselves.
What is unfortunately more likely, in the medium term at least, is a significant increase in the Victorian Country Fire Authority’s detection and communications infrastructure. And we all know who’ll be paying for most of that.
Over the next week or so the industry will come under unprecedented scrutiny as it begins to deal with the victims of the Victorian bushfires. As affected areas are opened up to loss adjusters, the cheques will be flying.
Prime Minister Kevin Rudd, who has taken a strong personal interest in the welfare of the bushfire victims, used a speech in Parliament last week to warn insurance companies not to hold up claims from victims of the Victoria bushfires – and the Queensland floods.
Assistant Treasurer Chris Bowen also let it be known he’d told the Insurance Council the Government expects companies to “act promptly”.
Mr Rudd also urged people “experiencing problems with their insurance companies” to contact the Government.
Opposition Leader Malcolm Turnbull weighed in with a suggestion that a “commissioner for disaster insurance” should be appointed to oversee the response of insurance companies to the Victorian bushfires and Queensland floods and act as an advocate for the victims.
None of that was particularly positive for an industry that has shown it’s well organised and prepared to do its job.
But then the major problem that’s likely to rear its ugly head in the bushfire zone won’t be shoddy claims work or unsympathetic insurers – it’ll be the high level of underinsurance. (At least if there’s no insurance at all there’s not going to be a fuss – even if government and community generosity allows the homes of the uninsured to be rebuilt.)
Insurance Council studies in 2007 showed 23% of Australian households have no insurance at all, while up to 81% of those who are insured will be more than 10% shy of the true rebuilding costs.
It will be interesting to see how the Victorian and Federal governments react when the level of underinsurance in the bushfire zone becomes apparent.
The industry has not attempted to raise the issue of underinsurance in relation to the bushfire victims, but not even the Prime Minister can expect insurers to pay more than the policy allows.
Hopefully the insurers will be well prepared to shove the blame for high levels of underinsurance where it belongs – at the Victorian Government, which has taxed insurance to such ridiculous levels it has pushed it into the realms of unaffordability for many people just like the fire victims.
Many of them were living in the bush on the outer fringes of Melbourne because the land was cheaper than the city.
Premier John Brumby, who has always taken a hard line on retaining the fire services levy and other taxes on premiums, has announced a royal commission into the bushfires. It’s a brave move for the very cautious Mr Brumby, because he has ignored the old political dictum that you don’t call a royal commission without knowing what it will say.
But it would be a small miracle if he was prepared to see the issues of fire brigade funding and the state’s role in making insurance unaffordable included in the terms of reference.
Mr Turnbull has made the point that it could take years for the Victorian royal commission to report, and has suggested the Federal Parliament should conduct its own inquiry.
There must be some hope that the aftermath of the Victorian bushfires will encourage greater political and community understanding of the essential nature of insurance and the need for government policies that encourage people to buy it rather than carry the risk themselves.
What is unfortunately more likely, in the medium term at least, is a significant increase in the Victorian Country Fire Authority’s detection and communications infrastructure. And we all know who’ll be paying for most of that.