Mistakes were made, but flood inquiry must focus on future
It was one of the most absorbing exchanges of the Federal Government’s flood inquiry hearings so far.
Independent MP Andrew Gee, who represents flooded constituents in Eugowra and other NSW communities, wanted Insurance Council of Australia (ICA) CEO Andrew Hall to admit he was “embarrassed and ashamed”.
“Even in the first three days of the hearings we’ve heard evidence about policyholders being coerced, gaslit, ghosted, very vindictive behaviour, lies being told … the deliberate withholding of building and claim reports … Are you embarrassed and ashamed by that evidence?” Mr Gee asked.
“I’m not happy to hear it one bit,” Mr Hall responded.
“Are you ashamed of it?”
“I’m not proud to hear that that has happened and I’m sorry to hear that for the consumer.”
“Why can’t you say that you’re embarrassed and ashamed?”
And so it went on, with Mr Gee repeating his question half a dozen times. But as compelling as it was to watch, could the time have been better spent?
Even before the House of Representatives Standing Committee on Economics began examining insurers’ responses to the 2022 floods, there was almost universal acceptance that mistakes had been made.
While the vast majority of claims have been settled (96.9% of the 244,000 claims from the record-breaking NSW and Queensland catastrophe, according to the latest ICA statistics), in some cases insurers were overwhelmed as they tried to deal with hundreds of thousands of claims amid huge post-covid staffing and supply chain challenges.
Timescales blew out, temporary accommodation ran out, and code of practice communication obligations were breached more than 17,000 times in a year.
Mr Hall had already apologised for industry failings – and he repeated that apology, assuring the committee insurers will be implementing recommendations from a report ICA had already commissioned itself.
The impact on some claimants has been devastating. And while it’s important to recognise that, and to help those who still need helping, the committee should be able to focus on more than just holding insurance executives to account. For example, how the nation can fare better next time.
As columnist Waleed Aly writes in The Age and Sydney Morning Herald, “little is ultimately solved by venting at men in suits”. (Although the industry would take issue with his assertion that insurers pay out "as little as they can" and "their job ... is to try as hard as possible to deny your claim".)
Insurers are working hard to upgrade systems and processes, and increase staffing numbers in key areas, but they can’t have hundreds of employees sitting on their hands waiting for a major catastrophe to strike.
And it isn’t just insurers that are to blame when they’re overwhelmed by claims. Let’s not forget the planning authorities that have allowed thousands of homes to be built in flood-prone locations over many decades.
“This is a sector that’s under enormous pressure and is dealing with a changed climate in this country, which has dramatically altered the situation for a number of homeowners who live … in areas that never should have been developed,” Mr Hall reminded the committee.
On Friday, Allianz Australia MD Richard Feledy issued another apology, as had many of his peers, then called for a “constructive conversation” about flood insurance affordability.
And he’s right. The past needs to be acknowledged, but focusing on the future is how this inquiry will make a real difference.
How do we cope with claims from natural disasters turbocharged by a changed climate? How do we mitigate a fast-growing flood risk? How do we move away from optional flood products, which lead to delays and disputes, without pushing people out of insurance altogether? How do we keep property insurance affordable for all?
These questions are more important than how embarrassed and ashamed the industry is, or should be.
And with less conflict and more co-operation, this inquiry could start to find some real answers.
Below is the full exchange between Mr Gee and Mr Hall, which can be viewed here
Andrew Gee: Even in the first three days of the hearings we’ve heard evidence about policyholders being coerced, gaslit, ghosted, very vindictive behaviour, lies being told … the deliberate withholding of building and claim reports … Are you embarrassed and ashamed by that evidence?
Andrew Hall: I’m not happy to hear it one bit, Mr Gee.
AG: Are you ashamed of it?
AH: I’m not proud to hear that that has happened and I’m sorry to hear that for the consumer.
AG: Why can’t you say that you’re embarrassed and ashamed? Because I think any organisation would be if this is the way your members are behaving.
AH: Well, what I think about is the fact that we’ve got a lot of regulations in place and I work very closely with all those people who appeared last week, and wherever I hear a situation has arisen like that I do my very best to try to find out what’s happened and get to the bottom of the story.
AG: So you’re not embarrassed or ashamed by that?
AH: Well, first of all, I like to understand what’s happened, in all of those circumstances. And I heard what was said …
AG: It’s embarrassing, isn’t it?
AH: It’s not a good look for the industry.
AG: It’s shameful, isn’t it? Why can’t you say it? Why can’t you say it for what it is? Shameful.
AH: Well, if it makes you happy, I’ll say that we’re not proud of it and those stories don’t bring great glory to our industry, but I am always very happy to look at what has gone wrong. And particularly in light of the fact that [insurers] are very heavily regulated, and if something has happened in that regard, there are ways and means for that customer to be able to get compensated and for action to be taken against the insurer, if that’s what’s happened.
AG: You see, it’s not about making me happy. Your organisation is responsible for the regulation of this industry. Yet on that awful evidence, which was widely reported in the media, you seem to have an extreme difficulty in acknowledging how embarrassing and shameful it was. You are the body which oversees the whole industry and you can’t even acknowledge that.
AH: No, I acknowledge that, and I say to you that we are constantly striving to do better. I think the fact that the industry has laid bare, through a process, everything that went wrong shows you that we’re not embarrassed to talk about what’s going on. In fact, we feel that we’ve got an obligation to. Because this is a sector that’s under enormous pressure and is dealing with a changed climate in this country, which has dramatically altered the situation for a number of homeowners who live, and who have been allowed to live and buy properties, in areas that never should have been developed.