ICA picks out seven catastrophe-related areas insurers need to improve on

Eight insurers’ action responses to the Cat 221 were analysed for the report.

The Insurance Council of Australia (ICA) commissioned Deloitte to conduct a report which showed a comprehensive review of how insurers responded to Australia's largest-ever extreme weather event, identifying seven areas for action to improve future responses.

The report analysed the operations of eight insurers that handled approximately 99% of all home and contents, motor, and small business claims related to the floods in northern New South Wales and southeast Queensland in February and March 2022, referred to as Cat 221.

External factors posed significant challenges, such as labour market constraints, building material shortages, car price and availability issues, and rental vacancy rates.

The scale of Cat 221 tested insurers' claims processes and revealed vulnerabilities in catastrophe planning, resourcing, processes, technology, communication, and governance.

Insurers have made improvements based on lessons learned from Cat 221 but can do more to enhance customer outcomes.

Claim closure rates varied among insurers, influenced by factors like the event's exposure, policy definitions, and claim types.

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The report recommends the following seven areas for improvement:

1. Preparedness: Insurers should enhance their catastrophe planning, particularly for extreme catastrophes like Cat 221.
2. Customer experience: Insurers should improve communication with policyholders and ensure consistent claim handling and complaint resolution during catastrophes.
3. Resourcing: Redesign resourcing capabilities for catastrophe events, focusing on workforce planning and onboarding.
4. Operational response: Assess operational efficiencies in catastrophes through process, technology, and infrastructure investments.
5. Governance and transparency: Improve the ability to capture and leverage data and insights to understand the impact of internal and external factors on performance during catastrophes.
6. Coordination with government: Enhance coordination between government and the insurance industry for faster access to government funding, consistent clean-up approaches, and investment in resilience measures.
7. Code review: Rework the Extraordinary Catastrophe definition in the General Insurance Code of Practice as part of an upcoming independent review.

The ICA has accepted all seven recommendations in principle and will lead efforts to improve coordination with the government. 

The recommendation regarding the Extraordinary Catastrophe definition will be referred to the upcoming review of the General Insurance Code of Practice. 

An independent review of implementation progress is scheduled for the second half of 2024.