Insurance giants IAG and QBE are calling for a debate about the planning and development of housing in flood-prone areas, as the industry faces a long-term rise in costs from natural disasters.
The flooding disaster that struck Queensland and NSW, which is estimated to cost $1 billion, will further blow-out insurers’ claims natural catastrophes this year after wild weather sparked elevated claims over summer.
The massive scale of the flooding has reignited the industry’s call for a greater focus on resilience in higher-risk areas, while the head of the federal government’s disaster recovery agency last week called for an end to floodplain development.
QBE’s chief executive for Australia and the Pacific, Sue Houghton, said planning laws should be a key focus, as she supported the Insurance Council of Australia’s call for investment in infrastructure and “stronger homes” in at-risk communities.
“There is a need to improve planning laws and strengthen building codes to support more resilient communities because without changes, the risk profile of communities exposed to extreme weather will not change,” Ms Houghton said. “Further, we support a review of land use planning arrangements to prevent developments in areas identified as high risk.”
IAG’s executive manager for natural perils, Mark Leplastrier, said there was a need to discuss the risks that communities were willing to take in terms of where homes were built and how they were designed. IAG has previously said planning policies relied too heavily of whether a location was at risk of a one-in-100 year flood. Some insurers say such statistics are not well understood and can give people a false sense of security.
While some flood planning policies are changing, Mr Leplastrier said insurers considered other risks beyond those considered by councils when setting premiums, including rare and extreme events, and that should be part of the discussion. “That’s the most important discussion that we need to have now, and it’s not just an insurance company perspective, it’s a whole bunch of other factors at play,” he said.
On climate change, Mr Leplastrier said the La Nina climate pattern had introduced “natural variability” in weather, but there was also evidence climate change could be associated with higher rain rates, such as the amount of rain in an hour.