“We’ve had a few wins,” said Andrew Hall (pictured above), CEO of the Insurance Council of Australia (ICA) during a recent webinar hosted by the Financial Services Accountants Association (FSAA).
Hall was referring to the work of the Business Advisory Council (BAC), established in September 2021 to provide solutions to insurance affordability and availability issues impacting small and medium sized businesses.
The ICA’s CEO was responding to a question from Insurance Business about what progress the BAC has made so far. The formation of the BAC was an ICA response to recommendations in the independent review of insurance affordability and availability issues by industry consultant John Trowbridge.
According to the ICA’s website, the BAC held its first meeting in October 2021. Hall said the group has met numerous times since and is making important steps. He said the BAC is working on a few “longer term issues” and “we’re seeing really good dialogue happening.”
“Really what the BAC is doing for us is we get a problem brought in the door and we go away and do the research and the work to understand what the claims history has been, what are the factors behind it, talk to insurers and just get a better sense for what they’re thinking,” said Hall. “Then we start sharing with that industry how they might need to uplift standards, or if they have, how to tell a better story to the underwriters.”
Hall said one of the challenges around insurance availability in the commercial sector is how the issues are “quite vertical”, rather than horizontal.
“What I mean by that is, for example, the live music sector’s issues are very different to what’s going on in, for example, private schools,” he said. “In the live music sector we’ve been able to work with them and go through the risk drivers behind these very expensive longtail claims from people, for example, getting injured by crowd surfing.”
Hall said stakeholders have looked at how the industry can better mitigate risk issues in this sector. For example, he said, better security and cameras to help answer questions around the standards needed to satisfy insurers and demonstrate to them that a venue is well run and looked after.
He said the BAC is also looking at caravan parks and their insurance challenges around physical asset exposure to cyclones or storm surge.
“Addressing affordability and availability really is one of our main focuses as a sector,” said Hall during the webinar. He said restricted risk appetites and low returns in some insurance sectors are resulting in a “structural adjustment” in insurance pricing.
In other words, for both businesses and individuals, premiums are continuing to go up, sometimes at alarming rates.
“You’re seeing some increases of up to 20% to 30%, year on year for home policies, 10%-plus for motor,” said Hall. “There are a lot of issues now starting to bubble up in terms of the affordability of insurance, particularly for lower socio-economic areas.”
Cyber coverages and insurance for music events, he said, are examples of areas where “insurance has been very challenged to try to calculate a price for a policy.”
Beyond the workings of the BAC, Hall said the ICA is approaching these challenges “in three sections” with short-, medium- and long-term solutions.
“In the short-term, we could look at the abolition of state taxes,” he said.
Hall mentioned the cyclone reinsurance pool and the house raising and buyback schemes in the NSW Northern Rivers area as examples of “important” ways to help bring down the pressure on insurance premiums.
He said a focus of medium-term solutions is land use planning, including a meeting this month [July] involving the ICA, the Planning Institute of Australia (PIA), building associations and local government.
“We’re looking to lead a debate around land use planning,” he said. “We’re going to try to get some sort of common agreement around what does no more floodplain development actually mean and what does it look like?”
Hall said better building codes are “critically important” for improving resilience to perils.
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