The industry’s social licence means it must find ways to ensure residents in high-risk locations have cover, Insurance Council of Australia chair Steve Johnston says.  

He has urged the sector to work constructively with government, “innovate at pace” and recognise risk mitigation in pricing.

“It’s in this spirit the industry stands ready to work with government on solutions to the affordability challenges facing customers in our most exposed geographies,” he told the ICA annual conference today.

“Our social licence dictates we cannot be an industry for 70% or 80% of the population. Through our own efforts, and in partnership with the government, we must strive to provide affordable insurance for all our citizens.” 

Mr Johnston said many industry figures criticised the cyclone pool concept but failed to provide an alternative solution, and insurers should not be surprised if governments step in where customer needs are not met. 

ICA CEO Andrew Hall told the conference in Sydney that discussions on covering high-risk locations took place during the recent industry and government visit to Europe.  

“Australia is definitely lagging global developed insurance markets in trying to find a solution for the protection gap, but that’s not a bad thing,” he said. 

Programs overseas provide an opportunity for Australia to explore what has and has not worked. 

“If we were to decide to go down the path of doing a public-private partnership for those high-risk ... homes, it needs to be a stopgap measure for the ultimate objective, which is risk reduction,” Mr Hall said. 

New Zealand insurers also visited Europe recently, following a surge in severe weather claims from Auckland flooding and Cyclone Gabrielle. 

“Reinsurers will start looking at us in a different way,” Insurance Council of New Zealand CEO Kris Faafoi told the conference. “We’ve got to make sure that we’re working with all the different stakeholders, whether it be local government, central government, banks, insurers, communities, to have longer-term conversations about risk reduction.” 

Mr Faafoi said the industry is doing better on advocacy but is still far from ensuring “it can get the policies in place and the investments in place to have that risk reduction” and keep insurance accessible. 

The conference also heard of challenges communicating with communities about Australia’s growing disaster risks. 

“We talk about, ‘This is unprecedented.’ Well, it’s not, it’s totally predictable,” state MP for flood-hit Lismore and NSW Recovery Minister Janelle Saffin said.