Posted on: January 10, 2022
Reflecting on Australia’s natural disasters of 2021
Australia has had more than its usual share of natural disasters in 2021. Sudden events such as floods, fires, earthquakes, cyclones, and hailstorms have been prevalent.
But what you think of as a disaster might not be the same in the insurance sector.
When the Insurance Council of Australia declares a catastrophe, it escalates and prioritises the insurance industry’s response to support policyholders impacted by the disaster in question.
A catastrophe declaration means:
- Claims from affected policyholders are given priority
- Claims will be triaged based on urgency, so the worst affected are assisted first
- The ICA’s disaster hotline is activated to assist policyholders with questions about their insurance
- ICA disaster response specialists are mobilised to the affected location to work with stakeholders, including government agencies, emergency services, local agencies and affected policyholders
- Insurers mobilise their disaster response specialists to assist their affected customers with claims and assessments as soon as declared safe by emergency services
- An insurance industry taskforce is established to identify and address insurance related issues arising from the natural disaster
Why is a declaration important? Once the council declares it, urgent assistance goes to those worst affected, insurers mobilise extra staff to work with local agencies and on claims, and disaster response specialists can go and assess claims. As well, insurers should resolve claims within four months. That’s according to their voluntary commitment to the General Insurance Code of Practice.
We’ll recap five declared catastrophes that happened in the last year or so. They’ve led to a total of $2.28 billion claims against insurers, with just under a quarter unresolved as of the end of October. There were almost 134,000 claims, with the average at $17,000. Most of the claims were related to property losses or damage, with a small proportion for contents, motor vehicles and interruption. Nine in 10 claims were personal; the rest were commercial.
2020 Halloween hailstorm
The Halloween hailstorm that ravaged southeast Queensland in 2020 was declared a catastrophe the very next day. Insurers incurred a total of $1.08 billion from 44,000 claims, with 88% of them closed by October this year.
Perth Hills bushfire
Meanwhile, the Perth Hills Bushfires in February resulted in 1,100 claims lodged worth a total of $88,000,000. The fires burnt for several days just 200 claims are outstanding as of October.
East Coast storms and floods
As well, NSW, Queensland and Victoria suffered extreme weather, including storms and floods over several days in March. Insurers incurred 57,000 claims totaling $645 million, of which 13,000 are still outstanding. Interesting to know the Insurance Council only declared an emergency when more than 5,000 insurance claims were lodged.
In April, tropical cyclone Seroja hit parts of Western Australia, including Kalbarri and Northampton. It severely damaged roads, electricity, homes, businesses and communications across several communities in that state.
About 7,100 claims were lodged, totaling $306 million in total. As of October, 2,800 claims were yet to be resolved.
Victorian storms and floods
Significant storms and flooding impacted regions of Victoria in June. About a quarter of the 28,000 claims incurred had been resolved by October. The total value of claims made was $241 million.
Time is of the essence
Even though insurers give priority to catastrophe-related claims, you can see there is a lag. That’s despite a triage process to source urgent help for those property owners worst affected.
The Insurance Council says COVID-19 border closures had severely hampered responses to disasters. In its Insurance Catastrophe Resilience Report 2020-21, the council says to improve responses Australia needs:
- More funding for public and private disaster mitigation projects
- Improving building standards and quality
- Making better informed land-use planning decisions.
Those policy and system changes will take time to take effect. Now international comparative research shows climate-change-induced higher temperatures can lead to storms becoming more intense, severe and lead to higher economic losses. By 2060, the bill for climate-change-related disasters will reach $1.2 trillion annually, according to Deloitte Access Economics.
It’s good to know that having us on your side can help navigate the claims process should you face a natural disaster. There’s a lot you can do to avoid financial devastation due to natural catastrophes. Talk to us about improving your risk management strategies. Insuring against such disasters is just part of your toolkit. We’ll help you protect yourself, assets and livelihood better.