PRESIDENT’S DESK: MARCH 2020 NEWS
Heartbreak and financial woes accompany fires
The fatal bushfires that have raged across Australia since September last year have horrified the nation.
They have been accompanied by heartbreak for so many, plus a big price tag. Terry Rawnsley, head of economic analysis at SGS Economics and Planning, told ABC News the economic fallout from the fires could be as high as $3.5 billion.
He said $2 billion-$3 billion included direct costs to fire-affected regions, such as the loss of tourism and retail income, and the impact on agricultural production.
He predicted some of the worst-affected communities would never fully recover.
Smoke haze in major capital cities could be an additional $500 million drag on the economy.
The fires have also had a huge impact on the insurance industry.
The Insurance Council of Australia (ICA) said insurance claims had reached $A939 million for 1 November to 10 January alone, and that is likely to grow.
Additionally, there is the pain for bushfire victims who are underinsured or not insured.
Sydney broker JMD Ross Insurance Brokers explained the ramifications in a blog published in mid-January.
The brokerage said a common error in calculating rebuilding costs was relying on a property’s purchase price or market value. “Many home owners simply deduct the land value to arrive at a sum insured. The reality is that rebuilding costs are far more expensive,” JMD Ross said.
“New building codes, especially in regional areas, make it more costly to rebuild many properties that were constructed in a less-regulated environment. Construction costs also spike after natural disasters due to shortages of labour and materials. That also applies to commercial properties.” Read more here.
The bushfires are a timely reminder to us to check our sums insured and ensure we are not among those saying “if only we had adequate coverage” when disaster strikes.
Of course, adversity brings out the best in some people, and the insurance industry is certainly doing its part. I attended a Disaster Legal Help Victoria seminar for lawyers providing pro bono legal services to those impacted by the fires and was pleased to hear the ICA and many general insurers already had representatives in various recovery centres to assist insureds.
Northern Australia insurance inquiry
In late December, the Australian Competition and Consumer Commission (ACCC) released its second interim report from its inquiry into insurance issue for northern Australia.
That report also examined under and non-insurance.
ACCC has so far made 28 recommendations as part of its ongoing inquiry, which is scheduled to deliver its final report in November.
The recommendations are designed to address the impact of stamp duties; make it easier to search for and compare insurance products; improve consumers’ rights; deal with conflicts of interest; reduce the potential for underinsurance; and reduce risks for current and future property owners.
The report is interesting reading and needs to be thoroughly considered by the insurance industry.
KPMG insurance industry report
The ACCC report dovetails with another released late last year, KPMG’s General Insurance Industry Review 2019, which reports on industry financial data and trends for FY19.
It is another interesting read. It shows the insurance industry's profits fell by 12% to $4.4 billion in 2019, reversing the trend of the last two years. Higher claims were due in part to natural hazards, including hailstorms across Sydney, the Central Coast and south-east Queensland in December 2018, and the Townsville floods in January and February 2019.
Gross written premium rose by 5% to $44.8bn in FY19. KPMG said the growth was largely rate-driven, as the industry continued to combat the rising cost of claims.
The industry’s loss ratio worsened in FY19 to 68% (up 5%). There is no doubt the bushfires will affect FY20 results.
AILA National Conference
I urge all members to mark these important dates in their diaries now: 28 October – 30 October.
They are the dates for the 2020 AILA National Conference, at Daltone House, Jones Bay Wharf, Sydney.
The conference theme is: 2020 Vision – An eye to the future.
The programming is advancing well; more details will be supplied soon.
As a special treat for delegates, the conference dinner will be at Luna Park on the Thursday evening, preceded by a cruise on Sydney Harbour, leaving from Darling Harbour.
The conference promises to be a blockbuster, so I urge all members and NZILA members from across the Tasman, too, to make every effort to get there.