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Perfect storm: insurers battle 500,000 catastrophe claims deluge

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A series of obstacles have constrained insurers as they battle half a million claims from a string of some of the worst catastrophes ever experienced in Australia.

The Insurance Council of Australia (ICA) tells insuranceNEWS.com.au the industry has been struck by 379,368 claims incurring losses of $5.84 billion from the combined total of three declared catastrophes last year (listed as numbers 213, 214 and 216 on its website), this year’s record flood, and Victoria’s Mansfield earthquake.

On top of that figure are another 105,000 recent claims with $1.7 billion incurred losses from three other ICA declared catastrophes – the “Halloween” hailstorm of 2020 (number 204), the Perth Hills bushfire (number 211) and catastrophic flooding in March 2021 (number 212).

The almost half a million claims all up from those natural disasters since November 2020 could not have come at a worse time for those affected.

Help has been disrupted by covid in a multitude of ways – initially from border closures in Victoria and WA, and later building supply shortages which are impacting worldwide due to disrupted supply chains. Skilled labour shortages have further hampered efforts to secure experts to assess damage, or find workers available and well enough to embark on repairs and rebuilds.

The access-challenged locations of some of the events – such as remote WA after cyclone Seroja and the heavily-wooded Dandenong Ranges in Victoria where access was prohibited in some areas for safety reasons – has also slowed claims progress. And some residents were wary of visits anyway due to social distancing.

Local media in Melbourne spotlighted the issue today with a special focus on the anniversary of Catastrophe 214. That severe storm with extremely high winds struck towns such as Kalorama, Gippsland and the Yarra Ranges, causing significant felling of large trees and property damage.

ICA CEO Andrew Hall was interviewed by local ABC radio morning host Virginia Trioli, telling her that the latest available figures show losses incurred from that ICA-declared "Victorian Severe Storms & Flooding” catastrophe stand at $302.97 million from 34,016 claims, with a closed rate of 88%.

Insurers came under fire for delays a year after the event, 3AW’s Neil Mitchell describing a “horrendous waiting game,” with Cockatoo resident Ben Owen telling the radio program his home was destroyed by a falling tree and work to rebuild his house was yet to begin and insurance company delays had set progress back.

“They sat on it for three months and said ‘No we’re going to pay you out’ so we’ve wasted three months there,” he said.

However, another affected resident told Ms Trioli her insurer, RACV, had been commendable and swiftly awarded a payout.

“In the last two years the closure rates have been a little slower than we would normally like to achieve and this is largely because of the real problems around trade and labour supplies on getting things done,” Mr Hall said.

“It has been compounded by covid, there is no two ways about it. Short-term accommodation is very hard to get, materials, trades and labour have been very difficult.

“I know sounds like we are giving excuses, I know things can be very difficult for people, and we try for that not to be the case.

“As everyone knows, finding a builder these days and getting a hold of materials and the like can be quite challenging and we have seen that play out in a number of events.”

Asked if insurers had a “cultural problem,” Mr Hall responded that more than $300 million had been paid out and 88% of claims closed in timely fashion.

“There have been literally thousands of claims paid out and people put back in their homes, they’ve had temporary accommodation covered, rental cars provided. Policies do respond.

“When there has been an event like this there will be a group of cases that are very difficult to determine because of the nature of the property, where and how they are built, the policy and coverage.

“I do believe in the overwhelming majority of insurance cases in this country ... we have largely responded the way we need to respond and looked after the community.”

Mr Hall said after the 2019/20 bushfires there was a very high cash settlement rate, whereas "it’s more of a mixed bag now with the storms and floods”.

Ms Trioli said it was “a very difficult time to be an insurance company because of climate change and extreme weather it’s coming at us thick and fast.”

Mr Hall added: “It is certainly capping off what has been a number of years of very big events now in this country with extreme weather. We’re in a period now in this country where I can’t see this letting up.

“We need to make sure people are living in homes of the right standard.”

After the storm, the ICA activated on-the-ground deployment of disaster specialists to Traralgon, Latrobe, Yarra Ranges and Hepburn to support recovery centres, and worked with Emergency Management Victoria and Bushfire Recovery Victoria to coordinate the disaster recovery effort.

The ICA says the 11.8% of still-open Catastrophe 214 claims are at a mixture of stages.

They may be all done apart from final paperwork, or they may have unfinished work underway, or be awaiting car parts or building materials, delayed by a lack of suitable trades or experts, or held up by dispute resolution processes.

The General Insurance Code of Practice states that insurers will respond to catastrophes efficiently, professionally, practically and compassionately. When a claim arises from an extraordinary catastrophe, an insurer will make a decision in writing within 12 months of receiving a claim, or explain internal complaints processes, the Code says.

Here are details and claims closure rates for the following catastrophes, in addition to 214, that have recently beset insurers and the communities they cover:

Catastrophe 221, the South East Queensland and NSW Floods. Claims closed 21%

From February 22 to March 9, intense and sustained rainfall led to flooding from Maryborough in Queensland down to Grafton in NSW. Many areas received more than half their average annual rainfall in just a week and various rivers set new peak records.

The ICA says claims incurred $4.3 billion from 216,465 claims, with claims valued at almost $1 billion closed.

Catastrophe 216: Severe Storms (SA, Victoria & Tasmania). Claims closed 64%

In late October and early November last year, significant hail, rain, and strong winds impacted SA, Victoria and Tasmania. Claims incurred $762.89 million from 103,103 claims.

Catastrophe 213: Cyclone Seroja. Claims closed 81%.

On April 14 last year, Tropical Cyclone Seroja made landfall, with the coastal town of Kalbarri taking the brunt, as did the community of Northampton, severely damaging homes, businesses, communications, and road infrastructure as well as the electricity service, across a number of West Australian communities. Claims incurred $357.94 million from 9,397 claims.

Catastrophe 212: Extreme Weather Event (NSW, Queensland, Victoria). Claims closed 87%

On March last year, large parts of NSW experienced devastating storms and flooding over several days, with South East Queensland also impacted. Claims incurred $618 million from 59,000 claims.

Catastrophe 211: Perth Hills Bushfires: Claims closed 87%

In February 2021, communities in the north-east Perth Hills region were affected by bushfire. Claims incurred $99 million from 1,300 claims.

Catastrophe 204: Halloween Hailstorm. Claims closed 93%

Hail as large as grapefruits struck south-east Queensland on October 31 2020. Claims incurred $1.05 billion from 45,000 claims.