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The bushfire royal commission: what's at stake for the industry

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Okay, so the stage is set for a bushfires royal commission, one that Prime Minister Scott Morrison says he “thought very deeply about” before deciding to make good on his words and go ahead with it.

Mr Morrison wants the final report by August 31, at the very latest. Over the next six months the inquiry will be looking at, among other things, how best to prepare Australians for what he has grudgingly accepted as a grave national threat: climate change.

Ways to better mitigate the impacts of natural perils and improve disaster resilience measures will be examined as part of the royal commission’s mandate.

The lessons from this summer’s deadly bushfires will be considered too. Mr Morrison wants to have the inquiry’s recommendations adopted before the next fire season, which is now just mere months away.

“The inquiry acknowledges climate change, the broader impact of our summers getting longer, drier and hotter and is focused on practical action that has a direct link to making Australians safer,” he said in his announcement of the royal commission.

“That’s why we need to look at what actions should be taken to enhance our preparedness, resilience and recovery through the actions of all levels of government and the community, for the environment we are living in.”

So will the royal commission turn out to be another talk shop, one for the prime minister to score political points and regain the narrative after copping heavy flak over his cack-handed response to the worst bushfire disaster since Black Saturday in 2009?

Or will there finally be meaningful action to address not only the unmistakable threats posed by climate change, but also associated requirements like the need for mitigation projects? And then, of course, there’s the well-documented problems related to taxes on insurance.

For now, at least publicly, the industry is hopeful – despite the omission of insurance from the inquiry’s terms of reference.

Insurance Council of Australia (ICA) spokesman Campbell Fuller says the royal commission will facilitate, among other things, an “analysis of insurance cover, including the causes of non-insurance and underinsurance in each state, and measures to improve the insurability of natural disaster-exposed communities.”

He told insuranceNEWS.com.au ICA and its member companies “are ready to provide expertise, insights and evidence to assist the royal commissioners in their inquiries and deliberations”.

“The terms of reference give scope to raise the adverse impact of the NSW Emergency Services Levy and state stamp duties on the take-up of adequate insurance. This not only impacts individual households but also the resilience of the broader community, because government has to make a greater contribution to recovery.”

IAG and Suncorp, the two leading personal lines insurers and therefore the insurers most impacted by the bushfires, have expressed similar sentiments.

Suncorp Insurance CEO Gary Dransfield, who is also ICA President and Chairman, says he hopes the inquiry “will lead to more positive outcomes” as the threat of growing natural disaster risk increases.

“As an insurer, we know from previous natural disasters what it will take to rebuild, and the importance of being aware of the emotional, physical and financial toll this process takes on those affected,” he said.

“We need practical solutions, initiatives and measures to help our communities and individuals to be better prepare for what lies ahead.”

IAG says the inquest provides an opportunity to develop a national, long-term approach to managing natural disasters, through a co-ordinated and collaborative response.

“Importantly, the policy response to building our nation’s resilience to natural disasters must focus on prevention,” a spokesman told insuranceNEWS.com.au.

“While IAG supports disaster recovery efforts and does not underestimate the positive impacts of recovery funding in helping our communities to rebuild after a natural disaster, a more balanced approach to spending on disaster mitigation and resilience measures and recovery and reconstruction is required.”

But the National Insurance Brokers Association (NIBA) remains sceptical about the whole thing. NIBA has previously said insurance issues surrounding natural disasters like the bushfires must be addressed.

“We will draw our concerns in regard to the NSW Emergency Services Levy to their attention and we will certainly make sure the royal commission is aware of the impact of taxes, charges and levies on property owners in NSW,” CEO Dallas Booth told insuranceNEWS.com.au.

For the insurance industry, the stakes are high as the royal commission gets underway.

This summer has been a very costly one for insurers. Since September, insurers have received more than $1.91 billion in bushfire-related claims and a further $904 million in storm and flood claims. The bushfire losses have surpassed Black Saturday’s, which were about $1.76 billion dollars in normalised value.

The insurance industry has long pressed for at least $200 million a year in Commonwealth-funded spending on mitigation works (matched by state and territory governments) to deal with increasingly expensive and costly natural disasters.

Will the royal commission consider it and submit it to the prime minister? Will the royal commission also push for the scrapping of insurance taxes, just as the 2009 Victorian bushfires royal commission successfully forced the change from a premium-based fire services funding system to one that spread the load across the whole community?

We will know after August 31, and the answer can’t come soon enough for the industry.