There’s nothing like an overseas trip to bring people closer together, as apparently evidenced by the delegation of insurance leaders and Assistant Treasurer Stephen Jones, which has just returned from Europe. 

Mr Jones tagged along with Insurance Council of Australia President Nick Hawkins (IAG CEO) and CEO Andrew Hall, and board members Sue Houghton (QBE Australia Pacific CEO) and Steve Johnston (Suncorp CEO). The team visited London and Munich where meetings were held with Lloyd’s, the UK flood pool Flood Re, and leading reinsurers and reinsurance brokers. 

Mr Jones came back saying he’s “more convinced than ever that the sensible and enduring interventions are all aimed at reducing the underlying risk, instead of masking it or pretending that it doesn’t exist”. He added that a flood reinsurance pool is “not the first place I’d go, to be honest”. 

This will be music to industry ears. Insurers (or at least the vast majority of them) have consistently argued that the only way to face up to the impact of climate change and bring home insurance premiums back down to affordable levels for all is to spend more on disaster mitigation. 

This means public mitigation, such as flood levees, and private mitigation, which includes disaster-proofing individual homes. At the same time, the country cannot be putting more people in harm’s way by continuing to build on floodplains. 

While the Federal Government has taken some action, committing an additional $1 billion over five years, and some states have started relocating the most at-risk properties, the industry still wants more. 

And it doesn’t want the Government to start distorting the market by offering subsidies or setting up a flood reinsurance pool. 

It’s one thing for Mr Jones to get this message from the local players – quite another for it to be reiterated by global reinsurance giants.  

The local insurers say one of the main reasons they’ve had to put up home premiums so sharply is rising reinsurance costs. Mr Jones says he asked the reinsurers what it would take to bring rates down, and was given a “strong message to take back to Australia”. 

“I really wanted to find out the things that the Government could do to make a difference, to help households,” he said. 

“And simply, they said, the worst thing you can do is subsidies. The best thing you can do is look at mitigation.  

“And from a government point of view, that means better infrastructure, but it also means stop doing dumb things like building the wrong houses in the wrong places. And that was a very strong message. 

“They want to see that Australian governments understand that the climate is changing, that we can't be building houses in the bottom of floodplains and if we do, that's going to affect everyone's premiums.” 

These comments will be welcomed by the industry. But consumer groups point out that mitigation is a long-term plan. It’ll take a decade or more to shift every at-risk community, or upgrade every disaster-prone home – if it’s even possible. And there’s a crisis in home insurance right now. 

Premiums have risen on average by 28% in the past year – the biggest rise in two decades – and insurers are still losing money on the class, so they’ll have to go up more. 

Consumer groups agree that mitigation is vital but argue that we need something in the interim for the most vulnerable consumers, who are being priced out of insurance. 

“Of course we understand that risk needs to be reduced and we need to think about mitigation,” Financial Rights Legal Centre Senior Policy and Communications Officer Julia Davis tells insuranceNEWS.com.au. 

“But direct subsidies can help people through this transition while we reduce the risk. It doesn’t make sense for us to subsidise $40,000 insurance premiums for ever and ever. But you can have subsidies be a tool to get people over the hump while we retrofit old homes or relocate whole towns.” 

She says it’s not fair on those living in at risk communities that they have to bear the entire burden themselves. 

“There are regional, remote areas that we want to exist as communities because they are big agricultural hubs.  

“A lot of the food that we rely on in the cities comes from those regional areas. If we want thriving, regional communities we need to find a way that people can protect their assets, or why should they take the risk? 

“We want people to act like rational consumers. A rational consumer would not live somewhere where you can’t afford insurance and everything you have is on the line. 

“I think government has a role to play to make it easier for people to protect their assets. It’s a shared risk. 

“The Minister is entitled to his views but we’re going to keep advocating for subsidies and this is a conversation we will be having for the next 10, 20, 30 years.” 

Ms Davis expects the Government's inquiry into insurers' response to last year's floods to also address home insurance affordability issues. 

“We are definitely going to put in a submission and my understanding is that the inquiry will result in more than one report,” she said. 

“It has a long timeframe. I think there will be one report talking about how the insurers did on the floods, and there’ll be another one really focused on affordability. The inquiry will absolutely touch on the affordability piece – it has to. It’s such a critical part of this conversation.” 

Mr Jones is singing the industry tune more enthusiastically than ever, but consumer groups are hoping that there’s still time for a crucial change of key.