Insurers should consider “out of the box” solutions to affordability and availability problems, such as creating an industry fund for resilience and mitigation efforts, a consumer group says.

“Currently, insurers often rely on the government to fund these initiatives, despite their strong advocacy for mitigation as a solution to insurance affordability and availability issues,” the Australian Consumers Insurance Lobby says. “It’s time for insurers to show leadership on this matter.”

The lobby’s submission to a Senate inquiry suggests the Insurance Council of Australia could gain agreement from members to contribute 1% of home premiums to a fund, generating $100 million annually for private mitigation.

The fund could provide interest-free loans to consumers facing insurance distress due to defects or major maintenance issues, and ACIL also floats the idea of the industry establishing an underwriting agency to cover clients who cannot afford or obtain cover, with a small portion of premiums from certain classes of insurance or profits to subsidise the initiative.

“While these measures might incur some costs for insurers, which would likely be passed onto consumers, and may not be universally supported as the best solutions, the long-term damage from inaction is far greater,” it says.

The Senate select committee examining climate impacts on premiums and insurance availability is due to report by November 19. 

ACIL says consumers should bear some but not all financial responsibility for mitigation measures and supports a scheme in which the government contributes a specified amount for every dollar spent on mitigation by property owners.

The Insurance Council’s submission to the Senate committee says the industry, in partnership with governments and regulators, is at the forefront of working to close the protection gap, including through the Hazards Insurance Partnership.

“A key HIP initiative has involved sharing data between government and industry to improve understanding of affordability, underinsurance and non-insurance issues, which can inform policy and programs,” it says.

Insurers are working with the Australian Prudential Regulation Authority to design its Climate Vulnerability Assessment of the sector and are pushing for more investment in mitigation infrastructure such as flood levees, plus changes to land use planning and building codes and ongoing home buyback programs, ICA says.

“While there have already been welcome announcements such as the federal government’s $1 billion Disaster Ready Fund and state-funded resilience programs being rolled out across high-risk regions, more needs to be done,” the Insurance Council submission says.