September 2021


Building resilience, the key to Australia’s future

An edited version of the annual Geoff Masel Lecture, presented by Andrew Hall, CEO and Executive Director, Insurance Council of Australia, entitled: A resilient Australia: The cost of insuring our future.

Insurance is a creature of the law, and its economic benefit to Australia can only be realised if customers and insurers alike can trust it to operate according to the law.

Through its commitment to the promotion, review, development and debate of insurance law, AILA plays a pivotal role in the preservation of that trust.

Trust is also at the heart of my work as ICA CEO.

I came to this role after 14 years in large corporates, including the Commonwealth Bank. I saw what happened when trust was lost.

One of the biggest factors in earning trust is ensuring the “can we/should we” test is an integral tool in an organisation’s processes and structures.

In the highly regulated environments of financial services, an overly legalistic approach can sometimes lead to poor outcomes.

The “should we” question requires perspectives and inputs broader than just a legal one.

This is not easy, but it underscores the importance of external perspectives in organisations during decision making.

As ICA CEO, my focus is on looking at how our industry can constantly provide proof points of trust to the community.

ICA’s collective response to catastrophic events is fundamental to the future of insurance and, given insurance is a necessary function of a prosperous economy, it is integral to Australia’s economic future.

Insurance is the key instrument in the national response to climate change, but it will fall short of its potential if government does not create a clear policy and institutional framework to build resilience.

Covid-19, climate and the challenge of resilience

We are living through a historic pandemic that has disrupted the trajectory of Australia’s economy and almost every aspect of daily life.

It has disrupted the business of insurance, and the changes it has wrought – from how insurance is bought and sold, to underwriting and claims management – are here to stay.

Likewise, we are living through the kind of extreme climate events that scientists have warned us about for decades. 

Just last year, in NSW, the longest drought in living memory was followed by a summer of bushfires that burnt through country at an almost unfathomable speed and scale.

The impacts of human-induced greenhouse gas emissions are becoming increasingly evident through the occurrence of more frequent and intense extreme weather events.

Reducing the risks is fundamental to maintaining a healthy private insurance pool to protect homes and businesses.

Resilience in public policy

Resilience is the brightest star in public policy right now.

The Federal Government has established a National Recovery and Resilience Agency and states and territories have established their own agencies and programs.

‘Building resilience’ is now baked into the language of government at all three levels.

That’s positive – we are moving from a narrow approach to natural disasters based on rebuilding to one that looks at how to prevent, prepare, survive and recover.

But responsibility for funding and delivery between governments still needs to be settled. We must decide, as a nation and as an industry, what resilience means, in concrete terms.

The definition of resilience is the ability to recover quickly to the position you were in before the unexpected occurred, which relates directly to insurance.  

But the measure of resilience is different for built infrastructure compared to what it means for the family home, and for health and community services.

It is important for us to develop a common understanding of the term as it enters building standards.

The National Construction Code should be reviewed and amended to ensure greater resilience to extreme weather is incorporated into building design and construction.

Better land use planning is also a major priority, if we are to ensure that future communities are out of harm’s way.

Empowering people means supporting them to better provide for themselves.

Studies have shown that reducing or removing state taxes on insurance would lead to a significant increase in the total sum insured for Australian homes. It’s a reform whose time has come, to empower more people to properly insure the things that matter to them.

Covid-19 will have a significant impact on what government means by resilience.

The pandemic response has expanded our understanding of how public health powers are exercised, and that impacts on the community’s understanding of what is constituted by business risk. 

An adverse impact of ongoing lockdowns is delays in repairing, replacing or making good damaged homes and other assets.

Lockdowns were not contemplated in any nation’s pandemic plans, so there is no rule book we can turn to.

As we emerge from the current crisis, the debate will turn to creating pandemic resilient communities. The insurance industry needs a voice in that debate.

Insurers play a critical role in helping their customers throughout the pandemic.

Given the current uncertainties, a national framework is needed to ensure the physical requirements of recovery from natural disasters can be accommodated safely and quickly.

ICA is working co-operatively with state governments on their individual circumstances and we understand their challenges and pressures.

However, without a nationally consistent framework for what defines essential work, workers and trades, if natural disasters were to occur in any states in the coming months, insurers will face extreme challenges to provide the normal level of support and response.

Meanwhile, in business policies, pandemic coverage was not contemplated for as the concurrent nature of such events was nearly impossible to price or obtain reinsurance for.

While the Federal Court process to properly test the meaning of business interruption clauses in contracts is appropriate and has a place in authoritatively determining the meaning of certain policy wordings, that is, by its nature, retrospective.

We need to look to the future to determine what is meant – and expected – by pandemic resilience.

The Federal Government, through JobKeeper and now disaster payments, acted as the insurer of last resort, covering insured and the uninsured alike, for government lockdowns.

A precedent has been set and articulating the boundaries of the public and private sectors in future pandemics will be vital if we are to restore business confidence and reopen the new so-called Covid normal economy.

The business case for doing resilience better

There is a clear business case for doing resilience better.

Over the past three years, insurers have paid more than $7.64 billion in natural disaster claims.

Some insurers have already stepped up to provide practical, understandable products to increase resilience and the Federal Government has conducted detailed, life-event mapping of the experience of living through natural disasters. 

The 2014 Productivity Commission report into Natural Disaster Funding Arrangements found 97% of public funds go to response and recovery and just 3% to prevention. We need to rebalance the equation.
We need to build resilient infrastructure and to measure resilience – what gets measured, gets done.

And, as part of the investments, we absolutely must ensure mental health is part of the equation.

Mental health: the uncounted cost

Mental health has traditionally been the uncounted cost of natural disasters. Inversely, it is the unvalued asset of resilient communities.

Australia has an opportunity now to bring everything together on the mental health impact of natural disasters.

Suicide rates are, unfortunately, a leading indicator of the mental health cost of natural disasters.

A long-term study by the Australian National University found an increased relative risk of suicide for rural men when the drought index rose from the first quartile to the third quartile.

There is a vast, hidden pool of mental stress lying underneath the surface of each natural disaster event, and a curious lack of recognition of what is happening.

As a community we encourage people to buy homes because we recognise owning your home has huge emotional, social and financial benefits. We help people rebuild when their homes are destroyed by natural disasters.

But we don’t help them with the emotional or social impacts caused by their home being destroyed.

While mental health support may be available in the immediate aftermath of a fast-moving disaster – like a bushfire, or flood – it is too often piecemeal.

And can be minimal, or non-existent, through slow-moving disasters like drought.

We look at the cost of claims but miss the actual cost to the community. Some communities are now in a constant state of recovery from successive natural disasters.

The mental cost of the community’s recovery from major losses should be counted alongside the financial cost of renewing infrastructure and restoring businesses.

ICA welcomes the National Mental Health Commission’s work to develop a national framework to guide a coordinated approach to psychosocial and mental health issues in the context of national disasters.

Safeguarding mental health and wellbeing is as important in the recovery phase as in the immediate aftermath.

Insurers must and do play their role in minimising the emotional stress for people. 

We need to ensure policies are clearly and easily understood, and our dealings with impacted customers are fair and supportive.

The “can we/should we test” is paramount in how we help customers recover from important events.

There is scope for state and federal governments to reach a formal agreement about long-term investment in recovery processes, so questions around the responsible level of government are worked out in advance, not argued in front of exhausted and struggling communities, as has happened in the past.

Australians have always had incredible compassion for those living through natural disasters.

Let’s build resilience so we avoid the trauma in the first place, so we can better protect our assets, so we can thrive as a community and an economy.

It will be hard to get done, across three levels of government, but it is vital, necessary work.

Insurers play a vital role in providing the data, insights and lived experience of where mitigation efforts should be focused. We stand ready to contribute and help.

Insurance lawyers will play an indispensable role in defining these critical concepts in contract and in legislation.

Now is the time to really identify what we mean by a resilient Australia, and then we can be confident about insuring our future.


In the Q&A session after his lecture, Mr Hall was asked how insurers rebuild trust in the aftermath of the Covid-19 BI claims responses. “It’s actions not words that matter most in gaining trust,” he said.

“Insurers will proceed with eligible claims, as soon as the court process is completed. Insurers will work collaboratively to speed things up. Claims will be assessed and paid quickly, once we can do that.”  

On the reinsurance pool for cyclone and flood-prone northern Australian regions, Mr Hall said ICA and the Australian Reinsurance Pool Corporation, established to cover terrorism risks, were involved in a working group examining models around the world to consider what pool options were working. The pool was still at the design stage and its ultimate aim was to reduce reinsurance costs. He said governments must invest in resilience to plan for exiting pools and returning to the private insurance market.

Asked about conflicts between shareholder and policyholder interests, Mr Hall said insurers earned their social licence from the community. “Those that lose sight of it pay a high price in reputation, regulatory fines and restrictions. Those things are not in shareholders’ [or policyholders’] interests.” He said the ‘can we/should we’ test was critical. “Even if it’s legal, should we do it?” The argument that something should not be done because it created a precedent “means nothing, precedents get thrown out all the time”.

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Resolve is the official publication of the Australian Insurance Law Association and
the New Zealand Insurance Law Association.