The 2022 Australian East Coast flood has been one of Australia's worst flood events. While communities are still reeling from the flood, the insurance industry is responding to the claims for loss and damage caused. At the same time, the insurance industry acknowledges that there may need to be long-term changes introduced as a result of the lessons from the flood.
The Flood
As at 10 March 2022, the Insurance Council of Australia (ICA) estimates that approximately 118,000 claims have been lodged as the result of the flood, with a combined cost of $1.77 billion in mainly property damage claims.
The insurance industry recognises that assessing and rebuilding will be a long-term endeavour, if it can be done at all, as:
- the volume of claims has required the industry to triage claims. Claims that are relatively less severe may not be reviewed for weeks by assessors
- shortages in materials and labour will likely extend rebuild and recovery timeframes
- finding temporary accommodation for the tradesmen and builders required in the affected areas is proving to be a major challenge
- in addition to the physical loss and damage caused by the flood, the human cost of the flood is expected to be significant. For example:
- The NSW Government has announced approximately $25 million, and the Federal Government has announced approximately $31 million, for mental health support for people impacted by the flood. Both levels of government expect that long-term support will be required, and
- Insurance Australia Group has announced that it is offering mental health support services to brokers who work with CGU who are supporting people impacted by the flood.
Changes to the insurance industry
While individuals and communities are responding to the flood, the desirability of necessary long-term changes to the insurance industry have been flagged.
The Federal Government continues its efforts to standardise definitions for the insurance industry. Most recently, on 15 March 2022, the Federal Government released a consultation paper in relation to standardising information about general insurance products and services. One issue which standardised definitions may address is the uncertainty accompanying different definitions of events such as rainwater runoff and storm surge.
In addition, the Greens have called for:
- the proposed Federal Government scheme for a $10 billion cyclone reinsurance pool for northern Australia to include flood events as well, and
- an inquiry into fully nationalising reinsurance for all climate-related disasters.
It is currently unclear when, if at all, these changes will be embraced.
Resilience and mitigation
The ICA has called for a focus on mitigation and resilience. For example, Andrew Hall, the ICA CEO, stated that "… infrastructure and mitigation investment is vitally important to prevent future harm and devastation to these communities, as we know flood events will inevitably repeat".
The ICA has called on the Federal Government to increase investment in this area to $200 million per year, to be matched by the State and Territory Governments. This funding would be used for local infrastructure such as levees and installation of flood early warning systems.
The Federal Government and the Opposition have committed to investing in infrastructure so that communities are more resilient to extreme weather events such as the flood.
Looking ahead
The insurance industry is assisting individuals and communities devastated by the flood. Recovery is expected to involve efforts directed at both the short-term and the long-term.
While changes to the insurance industry have been talked about, it is unclear when and whether they will be introduced (if at all).
The insurance industry itself is calling for a focus on resilience and mitigation, so that future weather events do not cause the severity of loss and damage which has been sustained in 2022.
