Widespread floods exposed insurance industry failings

Floods which hit northern NSW and southeast Queensland last year caused $6 billion worth of damage.

Floods which hit northern NSW and southeast Queensland last year caused $6 billion worth of damage. Photo: AAP

Widespread floods that devastated the east coast of Australia exposed multiple weaknesses in the insurance industry.

A review by the Insurance Council of Australia into last year’s flooding found the sector did not anticipate the scale of the natural disaster.

The floods, which hit northern NSW and southeast Queensland in February and March 2022, caused $6 billion worth of damage and triggered more than 240,000 claims.

The review into eight different insurers which covered 99 per cent of the claims said the size of the floods tested the claims handling process, as well as planning for catastrophes.

It also found external factors including a tight labour market, constraints on building materials and the price and availability of new and used cars exacerbated the insurance situation following the floods.

The council’s chief executive Andrew Hall said while the number of claims was six times higher than other declared catastrophes since 2016, insurers needed to do better in their responses.

“Insurers acknowledge there were failures of systems, processes and resourcing which impacted some customers as they progressed through their claims process,” Mr Hall said.

“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.”

The review said that while 84 per cent of claims made following the floods were closed, 46,000 claims remained opened one year on from the disaster.

While the speed of claims being finalised differed between insurers, the review said factors such as policy definitions and the mix of claim types also affected the length of claims to be signed off.

The review made seven recommendations, including calls for insurers to improve their customer service during natural disasters and deliver a consistent experience through claim handling and complaints.

It also called for insurers to redesign capability for catastrophic events and to improve preparation for disasters.

Mr Hall said the timing of the floods, coming after a dozen events classified as catastrophes by insurers following the 2019/20 Black Summer bushfires, had compounded challenges faced by the industry.

“Australia has the conditions to underpin an insurance industry at the global frontier of extreme weather responsiveness,” he said.

“Repeated exposure to such events, coupled with established disaster institutions and frameworks, means Australian insurers are well placed to show the world how to respond effectively and efficiently to extreme weather events.”


Topics: Floods
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