Insurer Suncorp urges State Government and councils to provide smarter flood mapping
INSURANCE giant Suncorp has assured Queenslanders they will continue to offer full flood cover, but warned some households could face unfair premium hikes or be priced out of the market if the government doesn’t work towards better flood mapping and mitigation strategies.
Personal insurance chief executive Mark Milliner said digital mapping, improved infrastructure and smarter planning would provide more equity among the community and negate the need for future disaster relief levies.
“We’ve got the perfect opportunity with these inquiries going on to make changes to what we do going forward, so that when disasters occur again, there’s less damage. It is important because we can manage premiums better,” he said.
“If we keep trying to future-proof areas that are at risk from disasters by working together with governments at all levels, then I think you can keep premiums at an affordable level.
“If we’re not careful and we go to a more broad, natural-disaster-type pool, you get lots of averaging occurring and I don’t think it’s fair on people.
“More importantly, the reality if you’re not careful, you end up with the whole community being slugged with extra taxes to help fund all these natural disaster pools.”
Suncorp is one of the only insurers to provide automatic flood cover.
Mr Milliner acknowledged the industry as a whole also needed to make improvements.
“We don’t smell of roses across the industry … obviously there’s some dissatisfaction out there with disclosure and lack of riverine flood cover, so you can’t say the industry has come up perfectly in that sense,” he said.
Suncorp, which is handling more than 50,000 claims in Queensland worth in excess of $1 billion in the wake of the floods and Cyclone Yasi, said its premiums would increase by an average 10 per cent but those who received considerable flood damage would pay more.
“It does vary depending on where people live,” he said.
“The reality is we should be pricing specifically and people who want to live in high risk areas should pay more for insurance.”
The insurer, which covers 40 per cent of the market, has assessed close to 95 per cent of affected homes, but Mr Milliner said it would take up to 18 months to complete the rebuild.
“The reality is we can’t do everybody at once, I can’t promise everybody we can get everything done tomorrow,” he said.
Mr Milliner said he was confident that reinsurance costs wouldn’t be too steep, despite the spate of natural disasters in Australia, Japan and New Zealand.
“Reinsurers profitability has broadly been strong and therefore whilst we’re in the middle of it here and it feels really bad, globally it’s not quite so bad,” he said.
“The reality is, our premium is going to go up a bit, but I don’t see any issues with us getting reinsurance. It’s important that we do because it protects our balance sheet and we don’t hold as much capital.”
Mr Milliner warned against the over-regulation of the industry.
“We are managing as a group over $3 billion in claims – we’ve got about a $7 billion premium pool but a lot of that gets paid back into the community every year because we pay claims,” he said.
“If governments start to change too much, then it will affect the economy.”
Insurance advisory business Jardine Lloyd Thompson yesterday warned “reinsurance cost increases for Australian risks are now very likely”.
“The number of large (reinsurers) globally is rather finite and none have avoided the recent loss activity,” JLT said in a report.
In a report, JLT also said the wild weather could affect government directives about zoning and building codes.
“Already we have seen evidence that certain damaged property cannot be rebuilt on the same part of the existing site,” JLT said.
“Compounding this is the potential that more stringent building codes could be introduced to ‘harden’ sites against natural perils.”
This demonstrated the need to have adequate cover “in place to address the extra costs of reinstatement following damage”, JLT said.
