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10 million policies pinpoint 15 ways to cut catastrophe risk

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The Insurance Council of Australia is preparing to publish 15 proposals quantifying for the first time just how much insurance premiums could decline under recommended measures to counter risks from cyclone, flood and bushfire.

During this week ICA will unveil the mitigation projects identified to be the most pressing, based on analysis of 10 million insurance policy records collected from insurers at the end of November. The data has revealed the real premiums paid in every town and suburb in Australia.

The analysis is the council’s latest move to demonstrate to governments the substantial amount of risk reduction that could be achieved by making homes more resilient.

The industry pooled claims data from historic events to create what ICA says is robust evidence about the vulnerability of homes, and likely future exposures. It has also identified another 12 areas requiring further examination.

ICA Head of Risk & Operations Karl Sullivan told the industry is asking governments to fund mitigation efforts, and “we’ve been able to use real data rather than speculation”.

“Left unmitigated, premiums will grow higher, becoming unaffordable for many more households,” Mr Sullivan said.

For example, insurers want the Federal and Queensland governments to team up in a $20 million household resilience program for older homes in low-income areas to make them cyclone-compliant. Particularly important is the need to ensure roofs are attached to the house foundations.

Mr Sullivan says that project would reduce insurance premiums by 10%.

The 15 proposals include a call for flood levees in high-risk areas that would result in some insurers dropping their premiums by 25%.

“We are identifying where the risks are, calling out the practical actions that will help, then we will lower premiums once the risk is mitigated,” Mr Sullivan said.

He says a “stark” correlation between higher risks and premiums has been singled out in areas where initial mitigation activities would deliver premium reductions, and many of the projects identified are not expensive in national terms.

“There are also many quick-win opportunities where better information about existing mitigation could deliver practical, almost immediate, opportunities for premium compression,” Mr Sullivan said.