Chapter 6

The impact of bushfires on insurance

The insurance industry’s response to the 2019-20 bushfire season was one of the issues considered by the committee and detailed in its interim report. The committee also considered the insurance losses associated with the fires, and examined the impact that increases to the cost of insurance could have on individual and community preparedness for disasters, particularly bushfires.
This chapter puts forward further information received by the committee around insurance since its interim report, including the impact of insurance premiums on families and small business owners.
It also considers further the role of the insurance industry in responding to bushfires and natural disasters, including the accessibility and affordability of insurance.

Evidence from communities

Evidence provided by stakeholders throughout the inquiry made it clear that for insurance to be able to help people manage risk from bushfires effectively, individual households, businesses and communities need to be able to maintain an adequate level of coverage.
The following section provides some of the compelling evidence from witnesses and submitters around their issues with insurance claims and policies, following the 2019-20 bushfire season.
Mr Graeme Freedman for example, a small landholder from the NSW South Coast, told the committee that his family had experienced a “second total loss of a house in 6 years”.1 Having changed insurance providers following the first loss, the family had thought they were adequately insured following the 2019-20 bushfires. Noting that this was not the case, Mr Freedman told the committee that he became involved in negotiations with senior representatives from his insurance company. The agreements Mr Freedman reached with his insurance company, resulted in Mr Freedman assisting several of his neighbours – mostly small landholders – to reach similar agreements with their insurance companies.
Even following a level of successful negotiation, Mr Freedman and his neighbours found that they were not adequately insured. They also found that the following items are almost certainly not covered, because the insurance industry’s on-line calculators and/or specific policies, do not cover them:
All rural internal fences, two-thirds of road fences and around half of neighbouring fences. [The cost of replacing fences on a ten-acre property is approximately $40,000 and owners are not eligible for assistance from Blaze Aid because small acreages are not commercial].
Rural dam and tank rain and water lines (mostly in rural poly) and pumps and pump electrical lines which generally burned out if they were not buried sufficiently deeply. [The cost of replacement would average $25,000 for a 10-acre property].
Underground electricity to house and ancillary buildings and sheds. [These cables often burnt back from each exposed location underground and needed to be dug out with excavators – the cost of replacement averages $15,000].
Underground rain-water 90mm PVC-lines going to tanks [100 metres would cost approximately $10,000 to replace].
Underground 100 mm PVC-sewerage lines to septic tanks [approximately $10,000 to replace].
Septic tanks, air blowers and power lines for septic tanks [depending on the damage, between $5,000-$20,000 to replace].
Rainwater tanks [approximately $15,000 per tank, including cabling and piping].
Perimeter security systems and gates and collapsed culverts.2
Mr Freedman told the committee that, in short, “we can pretty much say that outside of the villages (where most of this infrastructure is delivered as a service) there is nobody who has any chance of being adequately insured”.3
Ms Janice Newnham, of the Walwa Community Recovery Centre, informed the committee that while she personally had not experienced issues with insurance, she had heard “some dreadful stories from community members”. She drew on a personal example, and told the committee of an interaction with an insurance company:
… we acted as an intermediary for my mother-in-law. The assessor came to look at her house, which is now a wreck of rubble. He stood there, scraped some soot off his immaculate suit and his polished shoes and said, 'Surely you can salvage something from this. It's not a total write-off.' There was nothing there!4
Ms Kate Cotter, Chief Executive Officer and Founder of the Bushfire Building Council of Australia Ltd (BBCA), remarked on the spiral which can occur through unaffordable insurance premiums. Ms Cotter noted that if there is pressure on households for insurance premiums they cannot afford, “that introduces the cycle of underinsurance to no insurance, and of course that’s linked to the ability to get mortgage finance where you need to have insurance”.5
Mr Max Horn, President of the Megalong Valley Community and Landholders Association Inc., told the committee that insurance was clearly an issue for his community, with “some residents, farmers and businesses in our valley … not fully insured against fire damage and related business risk, as it is unaffordable for them”. Mr Horn suggested that:
There is a case for a government supported subsidy for insurance costs in certain cases where there are positive externalities such as food production, grassland environment maintenance and employment.6
The Alpine Shire Council told the committee about significant issues it was having around securing affordable insurance for its business. Mr William Jeremy, Acting Chief Executive Officer of the Council, advised that:
Some of our businesses are unable at this point to secure insurance. Those are the larger businesses up in the Alpine resorts and in the Alpine village of Dinner Plain and Harrietville. So the areas that were most significantly impacted or are under risk are really struggling to secure insurance. And, where they are able to secure insurance, they are seeing premiums that have gone up 300 to 400 per cent over what they were prior to the bushfires. It's a very significant issue. We are 18 months on and it has not been resolved, and we are heading into another bushfire season. It's an issue that we really need to get on top of collectively, to try to find some solutions and to support our businesses. We are concerned that we will see business failure and concerned about seeing businesses that underinsured potentially heading into a bushfire season. We are seeing businesses that potentially won't start or won't expand because of some of the impacts and their inability to get insurance.7
The sentiments expressed by Mr Jeremy were shared by Ms Fiona Nicholls, of the Alpine Community Recovery Committee (CRC), who provided the following example of a business trying to get insurance after the fires:
A member on our CRC—she's doing a lot of volunteer time—runs a business. It's got assets of about $1.5 million to $2 million. They want to insure it. They used to have insurance for $14,000 a year. They got a quote after the bushfire. They weren't burnt. They weren't in the Alps; this is actually in one of the valleys. They got a quote for between—and I will get the exact numbers—$75,000 and $85,000. So, when they say a 300 to 400 per cent increase, that's real. But, when it went to the reinsurer, they said no. So a business that is a family business, a viable business, an ongoing business, has no insurance. So what they're doing is putting their money that they would put into insurance into a fund so that, should they get burnt out, they can pay their bills. They're hugely responsible, a family business, but they would lose everything, and they're trying to run it.8

Insurance policies – specific issues

Evidence was received by the committee about specific issues with insurance contracts and policies which became evident after the 2019-20 bushfires, and which caused financial hardship for some.

Temporary accommodation

The Shoalcoast Community Legal Centre (SCLC) observed, for example, that the bushfires highlighted the inadequacy of the temporary accommodation clauses in insurance contracts, noting that the majority limit an insurer’s liability to pay for temporary accommodation to a period of 12 months. The SCLC argued that the time needed to clear blocks and commence a rebuilt would often exceed 12 months. The SCLC explained the impact of the 12month limitation:
SCLC observed that after accommodation payments ceased, clients began having to pay for both their rebuild and rental accommodation. In many cases clients were forced to dip into their insurance settlement monies to cover the cost of living. In many cases this pushed clients into financial hardship.9
While the SCLC was able to work with insurers to secure goodwill payments for their clients, the SCLC argued that “the fact remains that the 12 month limitation for temporary accommodation is insufficient to allow clients to rebuild homes without causing financial loss”, and recommended insurance companies increase the standard limitation period for temporary accommodation to 24 months.10

Government grant access

The SCLC also noted that some government disaster relief grants could not be accessed by their clients, because of agreements between insurers and builders. The SCLC explained that:
The Home Builder grant offered $25,000 to persons building new homes or renovating existing homes where the renovations were for $150,000 or more. The grant guidelines made specific provision for bushfire affected clients, indicating bushfire repairs would be classified as renovations for the purposes of the grant. An application for the grant had to be supported by a copy of a contract between the builder and the client.
Clients who received a cash settlement from their insurer were able to successfully access the Home Builder grant to assist them with their rebuild and/or repairs. However, for those clients whose insurer was managing the repairs they were unable to access the grant as the agreement was between the builder and the insurer.11
The SCLC pointed to the inequity between those who received a cash settlement from their insurer being deemed eligible for the grant, “while those who allow the insurer to manage their repairs are obstructed from accessing the grant”. The SCLC called for grants criteria to be designed to accommodate these differences and for insurers to interpret their policies in such a way “so as not to obstruct persons from receiving grants”.12
Mr Stephen Brown made the same point, submitting that there was inequitable access to funds and programs as part of the recovery process. Mr Brown said that some property owners were able to “personally draw off insurance and pay excesses for repairs”, while other residents had access to grant or donation funding, but that “sometimes this may be differentiated on the basis of a property not being a principle residence”.13

The role of the insurance industry

The Insurance Council of Australia (ICA) issued its Insurance Catastrophe Report: 2020-21 in August 2021. This report advised that the 201920 bushfires eventually encompassed 183 postcodes across four states—resulting in $5.47 billion in costs against nearly 305,000 claims (of which 39,000 were commercial). The average Black Summer bushfire insurance claim was $60,000, compared to $12,000 for non-bushfire claims.14
The Report noted six policy measures that the ICA has identified to be enacted, to “better protect Australians from the impact of natural disasters and improve the recovery and rebuilding process” following natural disasters. The six policy measures are:
investing in resilience;
improving building quality and standards;
better land use planning;
removing state taxes on insurance;
better COVID frameworks; and
co-ordinated disaster clean-up.15
On this final point, the ICA stated that:
State and Federal emergency response agencies should leverage insurers’ core competency in and experience of disaster response and recovery and collaborate with the insurance sector and other agencies to implement standardised arrangements for disaster clean-up that best serve natural disaster-impacted communities.16
On this point, at a hearing with the committee on 27 July 2021, Mr Nico Padovan PSM, Chief Operating Officer of the National Recovery and Resilience Agency, advised that the NRRA had been liaising with the Insurance Council and various building associations in order learn the lessons of the 2019-20 bushfire season, and was of the view that consultation with the insurance sector was ‘particularly important’. Mr Padovan further explained that:
Understanding what it is that drives risk premiums in the insurance sector allows us then to prioritise those activities that would assist in reducing a risk premium. We cannot mandate to the insurance industry what premium they charge, but we can certainly identify and act on those factors that affect risk.17
The Australian Competition and Consumer Commission (ACCC) also spoke about the role of insurance in risk, and as part of its inquiry into insurance in northern Australia, found that:
Improving the resilience of properties and communities to natural hazards will have significant benefits now and into the future, including through lower insurance claims costs. Greater consideration of the likely benefits (and costs) of mitigation and other resilience measures is required.18

Committee’s interim report

The committee’s interim report went into detail about the role of the insurance industry in natural disasters,19 and the increasing consideration of climate change risks in financial and insurance company decisionmaking.
The interim report noted that some insurance companies have taken some action to respond to the risks of climate change through their underwriting and investment policies. The report also explained that various insurance companies have urged the government to take action to enhance resilience to natural disasters and provide greater investment in disaster mitigation.
The committee also considered the role of the Australian Prudential Regulation Authority (APRA), which, in recent years, has sought to ensure that regulated entities are seeking to understand and manage the financial risks of climate change.

Current role of APRA

On 13 October 2021, APRA’s Deputy Chair, Ms Helen Rowell, delivered a speech to the ICA, where she noted that APRA recognises the importance of insurance to financial stability, and therefore its Corporate Plan “specifically calls out insurance accessibility and affordability as one of APRA’s key priorities over the next four years”.20 Ms Rowell continued that:
Our focus here is on building the evidence base to better understand the issues, and magnifying our influence on contributing to a solution. This includes leveraging our supervision insights and system-wide perspective to advise stakeholders on the nature and extent of accessibility and affordability issues, and the risks that exacerbate these challenges.21
In making these points, Ms Rowell pointed out the major role that the general insurance community had to play in this area, given its position and ability to see problems as they are emerging—and therefore to respond to them positively and proactively. To this end, Ms Rowell said that this response needs to:
… go beyond what has often been the response of insurers to deterioration in profitability in a class of insurance business: namely significant increases in premiums and/or withdrawal of cover. Some variation in profitability is to be expected over time – but not the extreme cycles we have seen in some product classes that seem to continually repeat. There is a need for a different, more innovative approach by insurers to how they design and distribute products, manage claims, and communicate with consumers to help lessen such volatility in the pricing cycle and improve accessibility and affordability for policyholders.22
Ms Rowell also observed that “insurers are … collaborating with governments and local communities on risk mitigation and providing financial and mental health support for people dealing with unfathomable personal and emotional upheaval”.23

Preventing market failure

The Bushfire Building Council of Australia (BBCA) argued that to date, the insurance industry has “been unable to recognise or reward household, commercial or infrastructure bushfire mitigation actions because a scientific model that specifies and quantifies the effectiveness of mitigation (adaptation) actions did not exist”, prior to the Disaster Resilience Star Rating (DRSR).24
The BBCA explained that it had developed the DRSR as a scientific model, supported by the building industry, which “quantifies building performance (disaster resilience) and provides site-specific tailored mitigation actions (adaptation)”.25
The star rating system “takes a best-practice and holistic approach to bushfire resilience that covers building, landscaping and ongoing maintenance”.26
The BBCA continued that:
Quantifying resilience is the fundamental basis for pricing, rewarding, and financing adaptation – this is a world-first, Australian innovation.
DRSR transforms risk into an economic and social opportunity for Australia. Quantifying climate and disaster resilience and effective mitigation actions creates measurable economic value and public good.27
In its submission to the inquiry, the BBCA observed that public and private capital is needed for “adaptation of the built environment for climate and disaster resilience”. However, insurers have not been able to identify which actions households could take to reduce bushfires risk. As a result, insurers “have been unable to recognise or reward risk reduction activity’ and lenders have likewise been unable to give discounts “if they can’t quantify the risk reduction”.28
The BBCA also made the point that increasing the resilience of buildings “reduces the likelihood of market failure, where households cannot obtain affordable insurance and access to finance”. The BBCA asserted that:
Increasing the resilience of buildings provides net economic benefit to households, industry, and governments, even in the absence of disaster.29
The BBCA suggested that using the DRSR would provide a nationally consistent resilience measure to “enable adaption and resilience capital flows”. A common standard would be “critical for insurers, banks, governments and investors to price risk, reward risk reduction and finance resilient projects”. By way of example, the BBCA said that DRSR would:
reduce payouts;
price and reward risk reduction;
stimulate household action;
create a competitive insurance market;
help avoid market failure; and
create a sustainable business model.30
The BBCA put forward a clear funding strategy, to “accelerate the adaptation of the built environment for disaster resilience”, and noted it was important to follow the strategy as “each step builds on the previous step and transitions the strategy from government-led funding to self-funding market mechanisms”.31
The BBCA argued that the implementation of a nationally consistent DRSR could “provide insurers with the ability to price risk at the household level and reward household action”. Further, a household could then “voluntarily disclose their DRSR rating to attract more competitive insurance and finance offers”.32
The BBCA concluded that “preventing market failure relies on … nationally consistent, open source, forward looking risk information”.33 To this end, the BBCA recommended that the Australian Government as well as the state and territory governments “apply the DRSR model to assess and fund government adaptation and resilience projects to ensure efficient and effective public mitigation investment”.34

Findings of the Royal Commission

The Royal Commission considered the issue of insurance and natural disasters. The report stressed that for households and businesses to manage the risks from natural hazards and disasters they need to be adequately insured. The Royal Commission argued that it is vital (for consumers, the insurance sector and governments) that insurance markets operate effectively. It also noted that:
Insurance is important because individuals cannot rely on public and charitable entities to restore their positions following a natural disaster. Government funding does not take the place of insurance, and nor should this be expected. Further, governments should not disadvantage or disincentivise those who have insurance, for example through recovery targeted to the uninsured, as to do so may encourage underinsurance.35
Amongst the Royal Commission’s recommendations was a request that the insurance industry produce clear guidelines for consumers about what they can do to mitigate the risk of natural hazards to their homes, which could then be reflected in reduced insurance premiums.
The Government endorsed this recommendation, and the Minister for Agriculture, Drought and Emergency Management indicated that he had written to the Insurance Council of Australia seeking advice on how they will improve their consumer guidance on getting a fair premium through recognised risk mitigation actions.36

Government announcements

‘Reinsurance’ is the concept of ‘insurance for insurers’, and it is purchased by insurers to “manage their exposure to large losses resulting from insurance claims made in response to a major event, such a severe natural disaster”. Government-supported reinsurance pools have been implemented in France, the United Kingdom, and the United States, in order to “meet objectives such as improving affordability for those households at highest risk of natural hazards, or increasing the availability and choice of insurers for consumers”.37
On 21 May 2021, the Australian Government announced a reinsurance pool for cyclones and related flood damage in northern Australia. The pool, which will commence on 1 July 2022, would cover residential, strata and small business property insurance policies in northern Australia—and be backed by a $10 billion Government guarantee.38
In a discussion paper released about the pool, the Treasury said that the pool would “seek to improve the accessibility and affordability of insurance for household and small business in cyclone-prone areas, which are mainly located in northern Australia”, while also encouraging additional insurers to enter the northern Australian market – which would “increase competition and place downward pressure on insurance premiums”.39
The discussion paper noted that the pool’s establishment would lower insurance premiums for household and small businesses by decreasing the cost of reinsurance, “which is a significant cost component of premiums for policies with high cyclone and related flood damage risk”. The discussion paper continued that higher insurance premiums were the main cause of underinsurance and non-insurance, and provided the following information as to why premiums could be higher in northern Australia:
Due to the greater risk of extreme weather events, including cyclones, insurance premiums are significantly more expensive in northern Australia. While there are legitimate reasons for this, including the greater cost to insurers to provide property insurance in northern Australia, this has led to cover becoming less affordable and accessible for consumers in the region.
The Australian Competition and Consumer Commission (ACCC) found that the average combined home and contents insurance premium in 2018-19 was about $2,500 in northern Australia, compared to about $1,400 for the rest of Australia. Between 2007-08 and 2018-19, combined home and contents premiums increased by 122 per cent in northern Australia, compared to 71 per cent for the rest of Australia.40
A Treasury Taskforce has been established to consult with industry and community representatives to inform development and a decision on the reinsurance pool’s final design. The pool will be administered by the Australian Reinsurance Pool Corporation.41

Committee views

As climate change continues to cause increasingly dangerous and unpredictable natural disasters, it is vital that property insurance remain accessible and affordable to all, particularly those in areas of heightened risk of bushfires, flooding and other natural hazards. The committee reiterates its views put forward in its interim report, that the insurance industry has a vital role to play in responding to increasing climate risk and disaster mitigation.
The evidence before the committee showing dramatic and unattainable premiums following the bushfires is upsetting, as is the evidence of the great difficulty that individuals and families experience in trying to finalise insurance claims and secure ongoing, affordable policies. That premiums can increase by a magnitude of 300 to 400 per cent following a natural disaster – particularly for commercial enterprises upon which a community may rely – is unsustainable and cannot occur after each natural disaster.
The committee therefore welcomes the views put forward by APRA, and its acknowledgement that the industry has previously increased premiums or withdrawn cover in the face of deteriorating profitability. The committee supports APRA’s position that the affordability and accessibility of insurance is a problem in need of an innovative and proactive response. The committee encourages APRA to continue to pursue this approach, and work with the insurance industry to develop affordable solutions for policyholders and insurers alike.
However, the committee does remain concerned that the cost of the growing climate-induced failures of the insurance market will increasingly continue to be borne by taxpayers – through either the government guaranteed reinsurance pool as it proposed for Northern Australia, or through a government underwritten insurer of last resort.
In the committee’s view, insurance market failure should be addressed through increased expenditure on mitigation and resilience infrastructure to better address the risks that climate change and natural disasters pose to the community.
The committee suggests that much of this expenditure will need to be government funded, perhaps through a dedicated investment stream under the Future Fund, or a combination of on and off-budget mechanisms.

Improving disaster resilience and the cost of insurance

The committee supports the objectives and approach of the BBCA’s DRSR framework. A common standard for assessment of bushfire risk, which can be applied by insurers and households alike, would be of great benefit in promoting more affordable insurance premiums while helping to improve the resilience of the built environment.
By pricing risk and rewarding risk reduction, the DRSR would allow consumers to be better placed for affordable insurance and finance products in a competitive market – and a market that is less likely to fail due to unaffordability and inaccessibility.
Further, a nationally consistent approach to investment in adaptation and resilience projects would help promote the efficiency and effectiveness of disaster mitigation efforts and ensure that the Government is taking the lead and adopting best practice in investing in disaster relief and management.
In light of the above, the committee echoes the calls of the BBCA and recommends that the Australian Government adopt the DRSR as part of its funding of adaptation and resilience projects. The Government should consult with the BBCA in determining how best to implement the DRSR in its investment and disaster relief programs.

Recommendation 13

The committee recommends the Australian Government apply the Disaster Resilience Star Rating (DRSR) model when assessing and funding government adaptation and resilience projects, in order to implement efficient and effective public mitigation investment. In applying the DRSR model, the Government should liaise with the Bushfire Building Council of Australia to determine appropriate funding models and identify suitable investment projects.

Geographic distribution of assistance

The committee notes the Commonwealth’s commitment to the establishment of a Northern Australia reinsurance pool, underwritten by the Commonwealth for $10 billion. Reinsurance is an effective way by which insurers can share risk. It already occurs across many areas of insurance. In relation to some risks, reinsurance can become a major component of premiums. Moreover, reinsurance costs can change markedly over time as estimates of underlying risks change.
Pooling can be an effective risk management tool where risk can be shared amongst many firms or households. This doesn’t require that all members of the pool have equal risk. But to work best, pooling requires a degree of diversifiable risk – i.e., risk that could fall amongst any members of the pool. Where some members of the pool are exposed to much higher risks, this can be more difficult to manage. To the extent that such risks are not managed through cross-subsidies, they can result in affordability challenges.
For most categories of natural perils, risks are not shared evenly around the community, either within a country or between countries. The degree to which risks are concentrated varies between natural disasters. Insurance is a global industry that pools natural peril risk within countries and also between countries. Flood is a type of natural peril that is characterised by particularly high concentration of risks in many countries, including Australia. Wildfires on the other hand have historically been a feature of a handful of countries, none more so than Australia.
In some instances, this has been managed in the past by cross-subsidies. These cross-subsidies are being unwound in many contexts as better data allows insurers to price risk in a more granular fashion, often down to the household level. This can be fairer in the sense that low-risk households receive more appropriate premiums. But it is resulting in affordability challenges, as demonstrated by the evidence received during the course of this inquiry.
This has resulted in a range of interventions in insurance markets. One example is Flood Re in the UK which involves the creation of a subsidised pool for high-risk households.42 The US also has a government managed flood pool,43 although the effectiveness of this pool is questionable. As noted above, the Australian Government has committed to creating a reinsurance pool for northern Australia. The details of this pool are yet to be determined and its eventual effectiveness is very much an open question.
Before considering the suitability of a reinsurance pool for bushfires, it would be useful to establish the distribution of fire risks among households and businesses. It would be important to establish the extent to which there is a clustering of very high-risk households. It would also be necessary to establish the extent to which insurers are able to price risk at a granular level. This has been increasingly possible in relation to flood risk. It may be more difficult in relation to fire.
A further requirement would be to establish the extent to which mitigation is possible at a household, firm or community level. Many flood and storm risks are difficult to mitigate without major capital expenditure (for example a flood levee for a town). Some bushfire risks could be managed through improved land management or by retrofitting existing buildings as discussed above. Mitigation may be more difficult in extremely high-risk areas.
Insurance may be offered to many households, but there can often be issues in relation to coverage, especially if rebuilding costs aren’t suitably built into the level of cover. In many bushfireprone areas, houses will have to be rebuilt to much higher standards than when they were originally built. On top of this, some policies may offer lower amounts of coverage for some types of risk.
It would be useful to assess the market coverage for bushfire risks in different areas. One of the reasons for the debate in relation to a flood and storm pool for northern Australia was the fact that, in many areas, no insurers were offering flood or storm coverage in some towns or postcodes. It would be worthwhile tasking a suitable regulator with assessing the extent of coverage for bushfire risk across Australia.
The committee is of the view that a number of strategies are worth exploring in order to effectively address the potential for insurance market failure in bushfire prone regions:
Ways in which to improve mitigation (e.g., including subsidies, improved education etc.);
A clearer understanding of market structure (e.g., are there regions/communities lacking bushfire risk management);
Emerging risks (e.g., improved data potentially resulting in insurers unwinding cross-subsidies);
A thorough examination of underinsurance (e.g., due to coverage not allowing for a full rebuild consistent with current building standards) and, to the extent that it exists, possible strategies to deal with it; and
A thorough examination of the risks and potential limits of the effectiveness of different models of government intervention (e.g., National Flood Insurance Program in the US and Flood Re in the UK).
For small communities, towns and regional cities in bushfireprone regions of Australia that are striving to grow and flourish, the affordability of insurance is increasingly recognised as a challenge to liveability and economic prosperity more broadly. The cost of insurance in bushfire prone regions is not just a problem for the region, but for the country more generally.
The committee therefore recommends that the Treasurer direct the Australian Competition and Consumer Commission (ACCC) to conduct an inquiry into the supply of the relevant range of general building and business insurance products to consumers in bushfire prone regions of Australia with terms of refence that cover various matters as listed below.

Recommendation 14

The committee recommends that the Treasurer direct the Australian Competition and Consumer Commission (ACCC) to conduct an inquiry into the supply of the relevant range of general building and business insurance products to consumers in bushfire prone regions of Australia, with terms of reference that cover the following matters:
pricing and availability of insurance to consumers in bushfire prone regions;
key cost components of insurance pricing in bushfire prone regions and how they have changed over time, particularly catastrophe risk;
terms and conditions on which insurance is supplied in bushfire prone regions;
competitiveness of markets for insurance in bushfire prone regions;
the existence and extent of any barriers to entry, expansion and/or exit in the supply of insurance in bushfire prone regions;
any impediments to consumer choice, including transaction costs, a lack of transparent information, or other factors;
identifying any regulatory issues, or market participant behaviour or practices that may not be supporting the development of competitive markets for insurance in bushfire prone regions;
the profitability of insurers through time and the extent to which profits are, or are expected to be, commensurate with risk, particularly having regard to the material financial risks posed by climate change; and
potential policy innovations that would stimulate the creation of a market relationship between expenditure on resilience and mitigation measures by households and firms, and insurers’ pricing of bushfire risk for those households and firms that undertake resilience and mitigation expenditure.

  • 1
    Mr Graeme Freedman, Submission 166, [p. 5].
  • 2
    Mr Graeme Freedman, Submission 166, [p. 6].
  • 3
    Mr Graeme Freedman, Submission 166, [p. 6].
  • 4
    Mrs Janice Newnham, private capacity, Proof Committee Hansard, 29 September 2021, p. 32.
  • 5
    Ms Kate Cotter, Chief Executive Officer and Founder, Bushfire Building Council of Australia Ltd, Proof Committee Hansard, 27 July 2021, p. 14.
  • 6
    Mr Max Horn, President, Megalong Valley Community and Landholders Association Inc., Committee Hansard, 28 April 2021, p. 21.
  • 7
    Mr William Jeremy, Acting Chief Executive Officer, Alpine Shire Council, Proof Committee Hansard, 29 September 2021, p. 15.
  • 8
    Ms Fiona Nicholls, Alpine Community Recovery Committee, Proof Committee Hansard, 29 September 2021, p. 35.
  • 9
    Shoalcoast Community Legal Centre, Inc., Submission 192, p. 7.
  • 10
    Shoalcoast Community Legal Centre, Inc., Submission 192, p. 7.
  • 11
    Shoalcoast Community Legal Centre, Inc., Submission 192, p. 12.
  • 12
    Shoalcoast Community Legal Centre, Inc., Submission 192, p. 13.
  • 13
    Mr Stephen Brown, Submission 183, p. 4.
  • 14
    Insurance Council of Australia, Insurance Catastrophe Report: 2020-21, August 2021, pp. 18-19.
  • 15
    Insurance Council of Australia, Insurance Catastrophe Report: 2020-21, August 2021, pp. 21-22. See the following chapter for evidence on the role of the insurance industry in building adaptation.
  • 16
    Insurance Council of Australia, Insurance Catastrophe Report: 2020-21, August 2021, p. 22.
  • 17
    Mr Nico Padovan PSM, Chief Operating Officer, National Recovery and Resilience Agency, Proof Committee Hansard, 27 July 2021, pp. 24-25.
  • 18
    Australian Competition and Consumer Commission, Submission 172, p. 2.
  • 19
    See Chapter 7 of the committee’s interim report.
  • 20
    Australian Prudential Regulation Authority, ‘APRA Deputy Chair Helen Rowell – Speech to the Insurance Council of Australia Virtual Industry Forum’, 13 October 2021, (accessed 19 November 2021).
  • 21
    Australian Prudential Regulation Authority, APRA Deputy Chair Helen Rowell – Speech to the Insurance Council of Australia Virtual Industry Forum, 13 October 2021.
  • 22
    Australian Prudential Regulation Authority, APRA Deputy Chair Helen Rowell – Speech to the Insurance Council of Australia Virtual Industry Forum, 13 October 2021.
  • 23
    Australian Prudential Regulation Authority, APRA Deputy Chair Helen Rowell – Speech to the Insurance Council of Australia Virtual Industry Forum, 13 October 2021.
  • 24
    Bushfires Building Council of Australia, Submission 186, p. 7.
  • 25
    Bushfires Building Council of Australia, Submission 186, p. 3.
  • 26
    Bushfire Building Council of Australia, Retrofits, [accessed 24 November 2021].
  • 27
    Bushfires Building Council of Australia, Submission 186, p. 3.
  • 28
    Bushfire Building Council of Australia, Submission 186, p. 22.
  • 29
    Bushfire Building Council of Australia, Submission 186, p. 3.
  • 30
    Bushfire Building Council of Australia, Submission 186, pp. 7, 22.
  • 31
    Bushfire Building Council of Australia, Submission 186, p. 24. The strategy is detailed on p. 23 of the submission.
  • 32
    Bushfire Building Council of Australia, Submission 186, p. 7.
  • 33
    Bushfire Building Council of Australia, Submission 186, p. 7.
  • 34
    Bushfire Building Council of Australia, Submission 186, p. 24.
  • 35
    Royal Commission into National Natural Disaster Arrangements, Royal Commission into National Natural Disaster Arrangements: Report, October 2020, p. 416.
  • 36
    The Hon. David Littleproud, MP, Minister for Agriculture, Drought and Emergency Management, Media Release, Six months of progress after the Bushfire Royal Commission, 3 May 2021.
  • 37
  • 38
    The Treasury, Reinsurance pool for cyclones and related flood damage, [accessed 19 November 2021].
  • 39
  • 40
  • 41
  • 42
    For more information, see:
  • 43
    For more information, see:

 |  Contents  |