The NSW and Victorian governments have committed to fund debris removal for all bushfire-affected properties.

The Insurance Council of Australia (ICA) welcomed the move, which should help mitigate underinsurance concerns as homeowners look to rebuild after one of the worst bushfire seasons for many years.

Losses from the catastrophe, which has devastated large areas of NSW, Victoria, SA and Queensland, have risen to $1.41 billion from more than 16,300 claims. This figure does not include losses from earlier bushfires in Queensland and NSW, or bushfires in WA.

ICA CEO Rob Whelan says clean-ups funded by the government were "a notable component of recovery efforts following the 2009 Black Saturday bushfires and are widely regarded as best practice after a natural disaster”.

“This arrangement treats all affected property owners fairly and equally. It should result in faster and safer site clean-up for many, and help ensure greater community safety in the removal and transport of potentially hazardous materials.

“Government-funded clean-up will also enable insurers to maximise the funds available in their customers’ policies for rebuilding.”

The Victorian Government says it has joined with the Federal Government to provide up to $75 million for the program “to demolish, remove and safely dispose of all buildings destroyed or damaged beyond repair”.

It says ICA “has assured the Victorian Government that all savings insurers accrue from the Government-funded clean-up will be passed on directly to policyholders so they can use those funds to help rebuild their lives”.