The Insurance Council of Australia has declared a catastrophe for large parts of New South Wales struck by devastating floods as the industry received more than 11,700 claims filed as of this morning.
The worst affected reasons are mid-north coast towns of Port Macquarie, Kempsey, Laurieton and Taree, and west Sydney in areas around Penrith and the Hawkesbury-Nepean valley.
While the ICA has yet to issue a catastrophe declaration for South East Queensland, it will be monitoring the situation as it develops.
On Monday the industry declared a disaster allowing claims from flood-stricken areas to be fast-tracked with a triage set up to prioritise those worst-affected.
Andrew Hall, the chief executive of the Insurance Council of Australia, said he expected the number of claims to grow.
“This remains an active natural disaster and it will take some time to gain a clearer picture of the damage. Insurers expect a large number of claims will be lodged in coming days as property owners begin returning to homes and businesses,” Hall said.
Floods are particularly costly natural disaster for insurers, with $1 billion paid out during the February 2020 east coast storms and flooding event alone.
The disaster adds to a horror couple of years for people of the region and the insurance industry as they have been battered by increasingly extreme natural disasters.
Between November 2019 and February 2020 alone the industry lost more than $5bn from extreme weather events and natural disasters.
At a Senate hearing earlier this month, the Australian Prudential Regulatory Authority warned that as the risk of extreme events is priced into insurance premiums, the cost of insurance may threaten the long-term stability of the financial system.
Dr Chloe Lucas from the University of Tasmania, who studies the social affects of climate change, said past research suggests nearly one in two people across Victoria underinsured – though figures from the Insurance Council of Australia suggests four in five households across the country are likely to be underinsured.
While those people will struggle, Lucas said even those with coverage can find themselves in trouble.
“During an event, people are very active. They have agency,” Lucas said. “After the event, if you’re insured, everything gets handed over to the insurance company so what you’ve done is outsource your risk to the insurance company.”
At that point, people can become overwhelmed by jargon, conflicting advice, lost paperwork or the act of having to retell their story several times which can cause people to be re-traumatised.
While the exact size and scale of the floods is not known, Lucas said insurance companies faced with yet another catastrophe would likely be forced to draw on reinsurance (the insurance policies for insurers) to compensate for the financial hit.
“Flood is the most expensive type of natural disaster that insurers deal with. This flood is affecting a huge number of people and it is going to be very expensive for them,” Lucas.
“This event comes on the back of the Black Summer bushfires. There have been other major flood events in the last year, and we can’t expect the next few years will be any easier.”
Labor senator Tim Ayres has been chairing a Senate inquiry into the Black Summer bushfires where the question of insurance coverage has become a sticking point.
He said the floods represent yet another disaster in “four years of very closely sequenced” catastrophes that is increasingly putting pressure on regional communities and the insurance industry.
“What the bushfires inquiry has demonstrated is that there is a significant level of non-insurance and under-insurance in some of these areas,” Ayres said. “We haven’t measured or seen the damage yet but some of these communities have already been through bushfires and now floods, and are communities that are already economically depressed and have been left behind.”
“Bushfires are a very significant cost, but they’re dwarfed by floods and hail events, and the early figures for this significant flood event are really just touching the sides of what will be a devastating event for the insurance industry.”
The Insurance Council of Australia has activated its disaster hotline that can be reached on 1800 734 621.