The Insurance Council of Australia has outlined 11 federal budget recommendations, as it warns the government not to gamble with Australians’ futures.

Top of the list is a $30 billion flood defence fund, as the industry flags ways to address rising climate risk. The abolition of state taxes on insurance also features, along with a review of Hayne royal commission reforms.

Many of the recommendations mirror those put forward before last year’s federal election, but ICA says urgency is growing as the climate changes and affordability issues mount.

It flags Cyclone Alfred, which resulted in $1.5 billion in insured losses this time last year – as a significant warning shot. 

“The next event is not a matter of if but when, and every budget that passes without serious investment is a gamble with Australian lives and livelihoods,” ICA CEO Andrew Hall said today. “Every dollar we spend rebuilding the same home after the same flood is a dollar we’re not spending building new ones.”

Although Mr Hall has previously accepted that a “partnership arrangement” with the federal government is needed to ease premium pressure on high-risk homeowners, the submission makes no recommendations around this issue.

Here is a summary of ICA’s recommendations.

Establish a flood defence fund

The proposed fund would cost $30.15 billion over 10 years, with costs shared between the federal, Queensland, NSW and Victorian governments.  

“With approximately 1.2 million properties at risk of flooding, the fund is a necessary response to our most expensive extreme weather event,” ICA says.

The fund would aim to deliver new critical flood defence infrastructure ($15 billion); strengthen properties in harm’s way ($5 billion); manage relocation buybacks ($10 billion); and future-proof existing flood mitigation infrastructure ($150 million).

Strengthen the Disaster Ready Fund

ICA wants the government to extend disaster resilience funding to a 10-year rolling program that prioritises hard infrastructure projects in collaboration with insurers to improve risk mitigation and data utilisation.  

“The critical challenge for the DRF remains that the scale of funding does not match the size of the hazard risk reduction needed to protect Australian homes and business in our most disaster-exposed locations,” ICA says.

An expanded hazards app

The Resilient Building Council should be given funding to expand its Bushfire Resilience Rating app to include risk and resilience advice for more natural hazards, including flood.

Abolish insurance taxes

The federal government should incentivise state and territory governments to abolish “unproductive taxes” on general insurance products, to provide cost-of-living relief and shift the burden towards less distortionary taxes.

“In 2024-25, the states and territories raised more than $8.9 billion from levies and duties on insurance premiums,” ICA says.

“This is $1.6 billion more than the entire general insurance industry collected in profits over the same financial year. The most effective and immediate way to reduce insurance premiums is the abolition of these duties, levies and charges on insurance products.”

Better hazard modelling

Funding should be provided for a national hazard data asset that makes current and future hazard data publicly available, and supports local government hazard mapping updates.

Disaster recovery

Establish Commonwealth recovery arrangements, as recommended by the Colvin review, in collaboration with states to better co-ordinate and prioritise disaster recovery.

Cyclone risk reduction

Provide $110 million over five years to the Queensland, NT and WA governments to support permanent cyclone risk reduction programs.

Royal commission review

The government should fund a post-implementation review of the Hayne royal commission reforms.

“The industry navigates more than 30,000 regulatory obligations across 25 authorities, with two-thirds of regulations being prescriptive rather than outcome-focused,” ICA says.

“This creates unnecessary costs, stifles innovation and diverts resources from customer service.”

Injury education programs

Training and education programs should be funded to improve risk management and national standards across industry sectors experiencing a higher frequency of personal injury liability claims.

Tort law review

A national review of tort law and civil liability arrangements should examine the appropriateness of current laws and their impact on insurance affordability for SME and non-profit organisations.

Motor workforce

The government should address motor trades workforce shortages through a range of measures including streamlined skilled migration assessments.

The federal budget is to be handed down in May. See ICA’s full submission here.

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