The Australian federal government and the country's insurance industry through their Hazard Insurance Partnership Programme (HIPP) have reached a significant milestone to improve the availability and affordability of insurance in Australia.
A joint media release by the Minister of Financial Services, Assistant Minister for Emergency Management, Climate Change and Energy, and Insurance Council of Australia provides the details of the Guiding Principles for resilience investment and the milestone achieved.
The Guiding Principles provide an agreed basis to support the prioritisation of investment that reduces risk; improve recognition of effective risk reduction activities in insurance pricing and availability; and can inform the design of future resilience and disaster risk reduction funding programmes.
The principles are a shared commitment by the federal government and insurers to focus investment where it will have the most impact by reducing risk through both household-level measures – such as resilient building materials and targeted retrofits – and community-level mitigation, including infrastructure like levees.
Natural hazard risk is increasing in many areas of Australia, adding pressure to the cost of insurance and widening the insurance protection gap in higher-risk areas. The government is committed to helping communities better prepare and recover more quickly from natural disasters.
The Guiding Principles have been developed through the Hazards Insurance Partnership, which brings together the federal government, the Insurance Council and commercial participants from the insurance and reinsurance sector to address the most pressing challenges facing Australia’s insurance market.
Australia Assistant Treasurer and Minister for Financial Services Dr Daniel Mulino said, “The agreement of these principles is significant in supporting Australia’s long-term economic resilience. Having investments which mitigate the risk from a natural disaster recognised in insurance pricing will help affordability. It is a part of the work to reduce the risk Australians face from an increasingly extreme weather events.”
Assistant Minister for Emergency Management Josh Wilson said, “The Guiding Principles mark an important step in strengthening collaboration between governments and insurers. Reducing risk before disasters strike is one of the most powerful ways to protect communities, improve recovery outcomes and ensure the availability and affordability of insurance. The Hazards Insurance Partnership will help households and communities to be better prepared in the face of more frequent and more intense weather events.”
Insurance Council of Australia CEO Andrew Hall said, “It is critical that industry and governments work together to target investment where it will have the most impact on reducing risk. Flood levees, cyclone-resilient building standards and bushfire-proofing measures make a material difference to whether homes can withstand the extreme weather events they face. The alternative is a costly cycle of rebuilding the same homes, in the same way, only for them to be damaged again in the next disaster.”
The Guiding Principles include the following:
I. Target and prioritise mitigation investments that are going to have the most material impact on reducing risk by working with all levels of government, industry and the community.
II. Focus on both household level mitigation investment and investment in community-level mitigation, recognising that different approaches may be needed.
III. Recognise fit-for-purpose household risk reduction activities funded by governments and households in the pricing and availability of insurance, for example recognising state based resilient homes programmes or the Resilient Building Council (RBC) scheme, or through measures such as house raising for flood, or various window and door protections for cyclone.
IV. Recognise effective government funded community level risk reduction activities in the pricing and availability of insurance such as the construction of levees, detention basins and dams for flood.
V. Consider the administrative burden and costs for governments, customers and insurers.
VI. Ensure decisions are made on the best data available and balance the need for supporting data/information, the need for action and greater levels of transparency.
VII. Recognise specific decisions on insurance products and pricing are a matter for individual insurance companies and are important in supporting competitive markets. Insurers are not committing to providing a specified percentage or numerical discount for mitigation activities.
VIII. Ensure that participation in this work is conducted in compliance with competition laws including the Competition and Consumer Act 2010 and HIP Competition Principles.