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Senators set to learn about bushfire impact on insurers

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The Senate inquiry into the 2019/20 bushfire season will tomorrow focus on the insurance industry and its ability to cope with the increasing challenges posed by climate change.

The Finance and Public Administration References Committee is expected to hear from major insurers, the Insurance Council of Australia (ICA), and the National Insurance Brokers Association.

The committee Chairman, NSW Labor senator Tim Ayres, says the Black Summer’s devastating bushfires put insurers under “extraordinary stress”.

“The industry reported nearly a billion dollars in losses to its bottom line in the March quarter alone,” he said. “Climate change will increase the likelihood of catastrophic bushfires and other natural disasters.

“There are questions for the insurance industry as to how its shareholders can continue to absorb these losses and protect Australians from the financial consequences of natural disasters.”

Meanwhile, ICA Head of Risk and Operations Karl Sullivan told the unrelated Royal Commission into National Natural Disaster Arrangements yesterday that Australia’s National Construction Code is “failing the community” by not stipulating a performance outcome for protecting property as well as for saving lives.

He told the online hearing the omission is “a critical vulnerability in the entire scheme”.

“It is time, given the changing climate, for the National Construction Code to step up and start providing a minimal level of property protection in new builds.

“The insurance industry has long held the view that while the National Construction Code is something we should all be proud of – it is admired all around the world – it is failing the community in one aspect.”

Mr Sullivan also called for a “national building dataset” in which information on how to meet a standard would be collated into a single point of reference. This would help homeowners who are seeking to make their property more resilient to a bushfire, cyclone or flood achieve the standard.

That would mean insurers and governments and other stakeholders could “understand what work was done at what time and to what compliance standard”.

He told the commissioners there is currently no single place where the insurance industry can source information on bushfires, floods or cyclones.

Over the past decade ICA has liaised with local and state governments to gather data, and sometimes dedicated agencies set up to deal with a particular hazard as well.

“There are gaps, depending on which hazard,” Mr Sullivan said. “For flood data there 40 are individual areas where we've been unable to source information.”

Insurers want “some consistent national standards around what that data should look like, the definition of the actual outputs, [and] a national agreement.”

ICA’s MyHazards app, which summarises weather and natural disaster risks that could affect homes and businesses, has had more than 10,000 downloads since its release just over a year ago. Version 2 is expected to be released next week.

The council found communities with acute levels of risk can be under-informed about what those exposures may be, so it took the raw data it had collected for insurers and transferred it into a consumable format.

“People who are facing very high insurance costs because of acute risks in their area have been prompted to have a look at MyHazards to determine whether exposure levels are one of the factors that they have to deal with,” Mr Sullivan said.