ICA CEO addresses House Committee, acknowledges failures in 2022 flood response

Despite the efforts of insurers and their personnel working around the clock, some systems and processes fell short, the CEO admitted.

In a House of Representatives Standing Committee hearing, the Insurance Council of Australia acknowledged the unprecedented challenges posed by the 2022 floods, testing insurers' systems, processes, and staff. 

Andrew Hall, CEO of the Insurance Council, expressed gratitude for the collaborative approach taken by the Committee and local MPs. 

Joined by the Insurance Council of Australia's Chief Operating Officer, Kylie Macfarlane, Hall began the proceedings with an apology on behalf of the insurance industry to customers whose claims during the 2022 floods were not handled to the industry's desired standard.

Despite the efforts of insurers and their personnel working around the clock, some systems and processes fell short, leading to real impacts highlighted in the testimony of legal and financial advice groups.

The Insurance Council commissioned Deloitte for an independent review of their performance, leading to the publication of "The New Benchmark for Catastrophe Preparedness in Australia" in October. 

The report identified deficiencies in claims processes, complaint-handling responses, communications, vulnerability identification, internal and external resourcing, processes, technology, and governance. 

Seven recommendations were made to improve future responses, all of which the industry has accepted, tailoring implementation to each business.

Hall highlighted the external factors that exacerbated the challenges, including a tight labour market, building materials constraints, and shortages in the rental and automotive sectors. 

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He emphasised the industry's commitment to addressing these issues and announced plans for an independent review of implementation progress by eight insurers in the latter half of 2024.

The CEO also touched on the financial strain the insurance industry has faced since the Black Summer Bushfires, with AU$16b paid out for 13 declared insurance catastrophes. 

Notably, AU$7.5b stemmed from the 2022 floods, AU$6.1b of which was attributed to a single event known as Cat 221.

Hall stressed the global nature of rising premiums due to escalating natural disaster costs, asset values, inflation, and increased capital costs. 

He called attention to the growing protection gap and urged collaborative efforts between government levels and the insurance industry to mitigate risk and moderate premium increases.

A key proposal for immediate improvement in insurance affordability was the abolition of $6 billion in annual state taxes on insurance. 

Hall commended New South Wales and Tasmania for moves to abolish additional levies on insurance and emphasised the need for policy solutions to reduce flood risk, including improved land use planning and better building standards.

He concluded by acknowledging the failures in the industry's response to the 2022 floods, assuring the Committee that insurers have implemented changes based on lessons learned. 

The Committee will proceed with questioning the Insurance Council representatives, seeking further insights into the industry's actions and plans for the future.