The bushfires royal commission has been asked to throw its weight behind moves to amend claims handling draft legislation resulting from the Hayne inquiry.

RACQ says in a submission that the draft bill to make claims handling a financial service sweeps up service providers such as builders, tradespeople and smash repairers, going beyond principles proposed by the Hayne royal commission.

The result would mean more insurers offering cash settlements, due to an increase in red tape, and would result in a loss of business for smaller providers who can’t afford the extra regulatory compliance costs, it says.

“We submit that this reform as currently drafted will reduce competition leading to increased insurance premiums and an increase in under and non-insurance,” RACQ says in the submission to the Royal Commission into Natural Disaster Arrangements.

RACQ also proposes federal, state and territory governments take into account costs and benefits for residents when considering land use and building codes for disaster prone areas, as high-risk locations continue to be developed.

The submission highlights the inundation in February area last year of Townsville’s Idalia area, which was developed in a flood plain.

“Given the high risk in this area, mitigation measures and building standards both at the private and public level may still be insufficient to make insurance affordable and/or practical thereby causing the end user (residents) to bear the losses of each disaster event,” it says.

“RACQ notes that the beneficiaries of such development (developers, builders, council) are often not the ones who face the significant financial and emotional costs of such natural disaster events.”

The insurer supports calls for Governments to facilitate sharing of improved building data to assist the insurance industry in pricing risks.

Federal, state and territory governments own PSMA Australia, which operates the National Building Database, which uses its proprietary Geoscape to profile more than 15 million buildings.

The Insurance Council of Australia recommends that $1 million be provided for the codification of building retrofitting standards so these can be documented, potentially leading to a drop in average premiums.

RACQ also supports greater mitigation funding and funding for disaster preparedness education campaigns, with a focus on high-risk areas.