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10 million home policies throw up 15 risk solutions

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The Insurance Council of Australia is preparing to publish 15 proposals showing how reducing risk to homes from cyclone, flood and bushfire would result in lower insurance premiums.

The data is drawn from 10 million insurance policies, and is the council’s latest move to demonstrate to governments the substantial levels of risk reduction that could be achieved by mitigating risk and making homes more resilient.

The industry pooled claims data from historic events to create what ICA says is robust evidence about the vulnerability of homes, and likely future exposures.

Over the coming week, ICA will unveil the most pressing mitigation projects, based on analysis of the huge number of records collected from insurers at the end of November, which detailed the real premiums paid in every town and suburb in Australia.

It has also identified another 12 areas requiring further examination.

ICA Head of Risk & Operations Karl Sullivan told today that the industry is asking governments to fund mitigation efforts, and “we’ve been able to use real data rather than speculation”.

For example, the insurers want the Federal and Queensland governments to team up in a $20 million household resilience program for older homes in low-income areas to make them cyclone-compliant. Particularly important is the need to ensure roofs are attached to foundations, as they are in all newer homes that meet more recent building regulations.

Mr Sullivan says that project would reduce insurance premiums by 10%.

Among the other 15 measures is a call for flood levees in high-risk areas that would result in insurers dropping premiums by a quarter.

“Left unmitigated, premiums will grow higher, becoming unaffordable for many more households,” Mr Sullivan said.

“Letting this situation continue will be detrimental to individuals, businesses, the economy at large and, naturally, to insurers, who want to continue protecting customers at rates they can afford.

“We are identifying where the risks are, calling out the practical actions that will help, then we will lower premiums once the risk is mitigated.”

He says a “stark” correlation between higher risks and premiums was singled out in areas where initial mitigation activities would deliver premium reductions.

“Some surprising results have emerged. Many projects identified are not expensive in national terms.

“There are also many quick-win opportunities where better information about existing mitigation could deliver practical, almost immediate, opportunities for premium compression,” Mr Sullivan said.

He commended IAG, Allianz, RACQ Insurance, Westpac and Youi Insurance for providing claims data from previous cyclone events.

Separately, ICA recently commissioned James Cook University (JCU) and the Risk Frontiers consultancy to conduct a cyclone and flood vulnerability study to encourage more resilient building codes and standards, and provide” real data” that will help shape changes to the next generation of buildings.

“Our members agree that damage from tropical cyclones and flood is likely to increase in the future,” ICA’s Climate Action Committee says. “In this way we intend to better understand the vulnerability of homes to tropical cyclones and flood now.”