The Insurance Council of Australia (ICA) says it has accepted all seven recommendations in principle from a Deloitte report that has highlighted failings exposed by the record floods catastrophe in northern NSW and southeast Queensland last year. 

Five recommendations for insurers cover improvements to preparedness, customer experience, resourcing, operational responses and governance and transparency. The report also calls for more effective co-ordination between government and the industry and a code of practice reworking of the extraordinary catastrophe definition. 

ICA CEO Andrew Hall says Australian insurers are well placed to show the world how to respond effectively and efficiently to extreme weather events. 

“This will always need to be weighed up against the cost impacts and keeping insurance affordable,” he said. 

“Deloitte’s rigorous and thorough report provides a clear roadmap for insurers on ways in which to meet this challenge and move forward on areas that have been identified for improvement.” 

The ICA-commissioned report, titled The New Benchmark for Catastrophe Preparedness in Australia, examined the operations of eight insurers that received around 99% of home, contents, motor, and small business claims related to the February and March floods, known as Cat 221. 

The total number of claims was more than six times higher than the average received for catastrophes since 2016. The event followed a string of disasters and came amid labour and supply shortages and other impacts from the pandemic. 

The Deloitte review found inadequate insurer scenario planning and outdated systems and processes were exposed by the scale and complexity of the catastrophe. 

Training short-cuts were taken as firms struggled to add new staff, some policy terms, such as those requiring a hydrologist, exacerbated delays. Co-ordination issues between insurers and government affected support program access, debris clean up and efforts to build back resiliently. 

 “The industry apologises to those customers for whom claims were not handled to the standard the industry strives to achieve, and we are working hard to better prepare for future extreme events,” Mr Hall said. 

“The timing of this flood, which followed 12 insurance catastrophes since the Black Summer bushfires as well as the global pandemic, compounded insurers’ challenge, yet the industry is on track to finalise every valid claim, rebuild homes and repair communities, and remain prudentially strong.” 

Suncorp says the firm has already taken action to improve practices, leveraging technology such as automation and artificial intelligence, along with insights from frontline, customers and community groups to improve communications and claims response to severe weather. 

IAG CEO Nick Hawkins also says the company has made a number of changes to improve communications during major events, speed up building and repair processes and streamline claims handling.   

“Guided by this report, more will be done,” he said. “Natural disasters have long lasting impacts on Australian communities. The sheer destruction that can be caused during these events often has terrible physical, financial, and emotional impacts on many people.” 

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