IAG’s ‘happy middle ground’ on flood
News that NRMA Insurance is supplying flood insurance to its NSW, ACT and Tasmanian customers is likely to shake things up in the industry as the controversial topic of flood cover is raised once again.
Since Zurich CEO David Smith’s criticisms last year that flood coverage in Australia is “arbitrary”, IAG’s NRMA Insurance is joining Suncorp’s GIO and Zurich in providing automatic flood cover to its policyholders – the third flood-inclusive product to be launched in the past year. Vero home insurance has also been providing automatic flood cover since February last year.
Unlike the other insurers, however, NRMA Insurance is giving those in high flood-risk areas the choice of opting out of flood cover, which they may well do if the anticipated $1000 jump in their premium is too much of a shock.
NRMA Insurance spokesman Andrew Tubb told insuranceNEWS.com.au the launch of the flood cover comes after the Insurance Council of Australia (ICA) finished its database of flood mapping for NSW, which has been combined with other hydrological studies and local council information.
The company now automatically provides flood cover to the 98% of its customers that live in low flood-risk areas at a “minimal” extra cost. The remaining 2% will either pay an increased premium for the cover – some reports have suggested a tripling of the price for cover in very high risk areas – or choose not to be covered for flood.
“We thought the best thing for these customers was to give them some choice and some options around their cover,” Mr Tubb said. “This way, if they would prefer not to pay for that higher risk, they can still be covered for other events and perils, which is not the case with some of the other products in the market.”
The new flood insurance cover must be a welcome relief for NRMA Insurance, which has continually been under pressure from many quarters to pay out on flood claims or classify flooding events as storm.
“If we have ever covered flood historically it’s been on an ex gratia basis, and obviously that’s unsustainable for a business going forward to cover claims in which it doesn’t collect premiums,” Mr Tubb said.
For those in some flood-prone areas, such as around Newcastle and the Hunter Valley in NSW, the cover – no matter how expensive – will be welcome news.
A Newcastle City Council report puts six suburbs at a high risk of flooding and significant parts of another 15 as under threat.
A resident in the Hunter area told insuranceNEWS.com.au that up until a couple of years ago a major flood occurred in the area once a year at most, “but now it floods every two to three months, with two to three major floods a year”.
He says in the past year the main highway has been closed three times and surrounding towns cut off due to flooding. Levees at nearby Raymond Terrace, on the Hunter River, have also been threatened. He says the farming properties in the area continually have to move their livestock as the waters breach the Williams and Hunter rivers.
For the areas of NSW that experience a major flood every 20 years, it will be a question of whether the premium outweighs the cost of repairing the damage themselves.
A flood – as opposed to a storm which is automatically covered in all insurance policies – is usually slow moving, so people generally have time to move valuables off the ground.
Mr Tubb says the product has initially been launched under the NRMA Insurance brand in NSW, the ACT and Tasmania, because that’s where the flood information is available at the moment. IAG hopes to launch next into the Queensland market – the other big flood state. It’s waiting for flood-mapping information from ICA.
In SA and WA, flood is already an optional component on policies sold by IAG subsidiaries SGIO and SGIC.
Now all that remains is for other insurers to follow IAG’s lead and introduce their own “pay for flood risk or opt out” policies based on reliable flood data. How long it takes for universal coverage to become available will be interesting.
IAG and its subsidiaries can now escape media and political criticism when their competitor insurers fail to pay out on flood claims.
The new approach is a no-brainer for the country’s largest personal lines insurer. It allows NRMA Insurance to provide cover to people prepared to pay a suitable premium – all they have to do is measure up the cost against their own perception of the risk.
If householders get it wrong they’ll only have themselves to blame, and IAG will be able to say the “victim” declined cover.
“Everyone in the insurance industry is aware flood has been an ongoing issue that everyone has struggled with,” Mr Tubb said. “We hope this product has reached a happy middle ground.”
Since Zurich CEO David Smith’s criticisms last year that flood coverage in Australia is “arbitrary”, IAG’s NRMA Insurance is joining Suncorp’s GIO and Zurich in providing automatic flood cover to its policyholders – the third flood-inclusive product to be launched in the past year. Vero home insurance has also been providing automatic flood cover since February last year.
Unlike the other insurers, however, NRMA Insurance is giving those in high flood-risk areas the choice of opting out of flood cover, which they may well do if the anticipated $1000 jump in their premium is too much of a shock.
NRMA Insurance spokesman Andrew Tubb told insuranceNEWS.com.au the launch of the flood cover comes after the Insurance Council of Australia (ICA) finished its database of flood mapping for NSW, which has been combined with other hydrological studies and local council information.
The company now automatically provides flood cover to the 98% of its customers that live in low flood-risk areas at a “minimal” extra cost. The remaining 2% will either pay an increased premium for the cover – some reports have suggested a tripling of the price for cover in very high risk areas – or choose not to be covered for flood.
“We thought the best thing for these customers was to give them some choice and some options around their cover,” Mr Tubb said. “This way, if they would prefer not to pay for that higher risk, they can still be covered for other events and perils, which is not the case with some of the other products in the market.”
The new flood insurance cover must be a welcome relief for NRMA Insurance, which has continually been under pressure from many quarters to pay out on flood claims or classify flooding events as storm.
“If we have ever covered flood historically it’s been on an ex gratia basis, and obviously that’s unsustainable for a business going forward to cover claims in which it doesn’t collect premiums,” Mr Tubb said.
For those in some flood-prone areas, such as around Newcastle and the Hunter Valley in NSW, the cover – no matter how expensive – will be welcome news.
A Newcastle City Council report puts six suburbs at a high risk of flooding and significant parts of another 15 as under threat.
A resident in the Hunter area told insuranceNEWS.com.au that up until a couple of years ago a major flood occurred in the area once a year at most, “but now it floods every two to three months, with two to three major floods a year”.
He says in the past year the main highway has been closed three times and surrounding towns cut off due to flooding. Levees at nearby Raymond Terrace, on the Hunter River, have also been threatened. He says the farming properties in the area continually have to move their livestock as the waters breach the Williams and Hunter rivers.
For the areas of NSW that experience a major flood every 20 years, it will be a question of whether the premium outweighs the cost of repairing the damage themselves.
A flood – as opposed to a storm which is automatically covered in all insurance policies – is usually slow moving, so people generally have time to move valuables off the ground.
Mr Tubb says the product has initially been launched under the NRMA Insurance brand in NSW, the ACT and Tasmania, because that’s where the flood information is available at the moment. IAG hopes to launch next into the Queensland market – the other big flood state. It’s waiting for flood-mapping information from ICA.
In SA and WA, flood is already an optional component on policies sold by IAG subsidiaries SGIO and SGIC.
Now all that remains is for other insurers to follow IAG’s lead and introduce their own “pay for flood risk or opt out” policies based on reliable flood data. How long it takes for universal coverage to become available will be interesting.
IAG and its subsidiaries can now escape media and political criticism when their competitor insurers fail to pay out on flood claims.
The new approach is a no-brainer for the country’s largest personal lines insurer. It allows NRMA Insurance to provide cover to people prepared to pay a suitable premium – all they have to do is measure up the cost against their own perception of the risk.
If householders get it wrong they’ll only have themselves to blame, and IAG will be able to say the “victim” declined cover.
“Everyone in the insurance industry is aware flood has been an ongoing issue that everyone has struggled with,” Mr Tubb said. “We hope this product has reached a happy middle ground.”