FUTURE INSURANCE AFFORDABILITY

Transcription

1 FUTURE INSURANCE AFFORDABILITY OCTOBER 2013

2 PREMIUMS PREP SCOPE PROBLEMS PARTNERSHIP

3 PREMIUMS How are they calculated? PROBLEMS What is driving increases? PREP Improving information & controls PARTNERSHIP Working together

4 FORGOTTEN FACTS The Private Insurance market is critical to the Australian Economy The industry pays out 98.6% of claims lodged, delivering over $22 billion to the community annually. There is no such thing as universal cover, every product has limits, disclosed to the consumer. Insurance is heavily regulated to prevent insurer insolvency. Insurers are required to charge a premium to cover risks and costs. 23 SEPTEMBER 2010

5 THE COSTS OF EXTREME WEATHER EVENTS ARE INCREASING ABS Mean Value of Houses TC Tracy Sydney Hailstorm Brisbane Floods 130k 100k 70k Brisbane Floods TC Tracy 30k 21 OCTOBER 2010 Source: Crompton and McAneney, Environ. Science & Policy)

6 THE COSTS OF EXTREME WEATHER EVENTS ARE INCREASING ABS Mean Value of Houses TC Tracy Sydney Hailstorm Brisbane Floods 130k 100k 70k Brisbane Floods TC Tracy 30k 21 OCTOBER 2010 Source: Crompton and McAneney, Environ. Science & Policy)

7 THROUGH AN INSURERS EYES The most significant factor driving the changing risk profile is growth in the built environment and population density. More $ at risk per Sq/KM

8 Community members (through purchasing insurance) can accommodate a reasonable level of residual risk in the built environment - achieved through application of three principles. Governments are responsible for enacting regulations to achieve a low risk environment for the community. LONG TERM PROPERTY INSURABILITY Insurers rely upon an understanding of the risk controls in place in order to determine residual risk. However, there are many different approaches taken. CONTEXT IS DEPENDENT ON RISK CONTROLS HAZARD MITIGATION Can insurance pricing and affordability be improved by Local Government and Insurers connecting through a common approach to measuring insurable residual risk to property. Often insurers have no detailed information upon which to rely.

9 EXAMPLE SCENARIO Residential Property on a known Floodplain No detailed flood mapping available to insurers No knowledge of resilience measures at property level No knowledge of any flood mitigation measures implemented Result Insurer acts prudentially and assumes highest level of risk exposure to property

10 EXAMPLE SCENARIO Residential Property on a known Floodplain No detailed flood mapping available to insurers No knowledge of mitigation measures at property level No knowledge of any flood mitigation measures implemented Result Insurer acts prudentially and assumes highest level of risk exposure to property Detailed Flood Map Residential Property on a known Floodplain Flood Resilient by Design Detailed flood mapping available Hazard precisely known Building understood to be designed to be resilient to Hazard Result Insurer able to use improved risk information to accurately price the lower or more certain risk.

11 EXAMPLE SCENARIO WHAT DOES THIS MEAN? Detailed Flood Map In many locations there is a potential disconnect between authoritative hazard data and the protection given by development controls, with insurance risk pricing. Without carrying out any further mitigation works there is a potential to influence insurance affordability by improving data availability. Flood Resilient by Design WHAT IF INSURERS KNEW THIS INFORMATION?

12 LOCAL GOVERNMENT WITH DEVELOPMENT CONTROLS IN PLACE BUT WITH PERCEIVED AFFORDABILITY ISSUES Identification of well performing development controls Quantification of value of existing mitigation Identification of residual mitigation priorities Ability to influence insurance risk analysis of region Property Resilience & Exposure Program Building Resilience Rating Tool + Building Resilience Knowledge Database + Surveyed building data + Hazard overlay on land parcels Property Resilience Overlay INSURERS ATTEMPTING TO PRICE RESIDUAL RISK WITH LITTLE CLARITY ON HAZARD AND DEVELOPMENT CONTROLS. Reduced uncertainty of hazards in region Acknowledgement of existing mitigation in place Acknowledgement of development controls that work Ability to assist local government with future decision on development, planning and mitigation. PREP Scoping & Discussion Update 10 July 2013

13 % ARI 1:20 Flood Risk 1967 Weatherboard Aluminium Roof Low set particle board flood 2007 Steel Frame & Pole Steel Roof Elevated OSB

14 EXAMPLE RESILIENCE HEAT MAP PREP Scoping & Discussion Update 10 July 2013

15 Community members (through purchasing insurance) can accommodate a reasonable level of residual risk in the built environment - achieved through application of three principles. Governments are responsible for enacting regulations to achieve a low risk environment for the community. LONG TERM PROPERTY INSURABILITY Insurers rely upon an understanding of the risk controls in place in order to determine residual risk. However, there are many different approaches taken. STATUS IS DEPENDENT ON RISK CONTROLS HAZARD MITIGATION Can insurance pricing and affordability be improved by Local Government and Insurers connecting through a common approach to measuring insurable residual risk to property. Often insurers have no detailed information upon which to rely.

16 LONG TERM PROPERTY INSURABILITY IS DEPENDENT ON RISK CONTROLS Can insurance pricing and affordability be improved by Local Government and Insurers connecting through a common approach to measuring insurable residual risk to property. YES HAZARD MITIGATION STATUS Development of PREP - Pilot program underway - Actuary study on value of resilience overlay - Insurer valuation of benefit of refined hazard data - Local council valuation of program value - Mitigation prioritisation study Post Validation Next Steps - Insurer discussion with States - Program comercialisation - Accreditation program for practitioners