Insurance Council of Australia (ICA) President Rob Scott says the industry needs to “rethink” how it communicates with the public in order to have a greater influence in the public debate after the recent natural disasters.

In a speech in Sydney last week, the Wesfarmers Insurance MD said it’s clear the industry’s messages are not getting through to key stakeholders such as the public, media and government.

“If we were successful, the key political response to the floods would not be targeted on insurance and potential insurance reform,” he said. “In the aftermath of the recent natural disasters, it is time to rethink how we, as an industry, tell our story and how we communicate with key stakeholders, the media and the broader community.”

Mr Scott says the industry needs a “communications plan that will endure, rather than just reacting to the issue of the moment”.

He adds that conveying “empathy and compassion” when communicating with the public is vital.

“When the message isn’t getting through, it is as much the problem of the person telling the story as it is the people listening.

“It is not appropriate for us as an industry to sit on the sidelines, attribute blame and wait for government to act. This is our problem and we must do what we can do to influence the debate and help deliver better outcomes to our customers.

“We will have greater influence in the policy debate as we build trust and respect amongst our key stakeholders, the media and with the community at large.”

Mr Scott says the confusion over the cover provided by flood insurance is also a “major reputational issue” for the industry.

He says a standard definition of flood and key facts sheets to accompany product disclosure statements are a step in the right direction, but that these measures fail to address “the underlying issue of whether flood cover is available or affordable”.

But while Mr Scott says maintaining the current flood cover situation is not sustainable from a “reputational perspective”, he disagrees that the solution lies with compulsory flood cover.

“It would be a serious concern if the industry was required to provide mandatory flood cover without an appropriate response from Government in the areas of detailed flood mapping and improved land use planning and building codes. This could lead to the exit of a number of insurers from the home and contents market, reduce competition and increase costs.”

He says if a discount for high-risk properties is to be funded by insurers it will be passed on “to those 95% of Australians that are not exposed to flood risk”.

“This then raises the issue of moral hazard and whether there are appropriate price signals to encourage mitigation of these risks.”

The availability of reinsurance is another factor which Mr Scott says must be considered in the debate over mandatory flood cover. He says that after the recent natural disasters in Australia and New Zealand, reinsurers “are more focused than ever” on understanding the risk rating capabilities of insurers.

“To put it bluntly, if an insurer is not able to demonstrate an ability to deeply understand the risks and price effectively, they will be unable to access capital from reinsurers and will be unable to participate in some segments of the insurance market.”

Also see “ICA acts on communications criticism” in THE PROFESSIONAL