After $5 billion in flood damages, inquiry to run the ruler over insurers’ response

As global weather becomes more damaging, the Federal Government has announced an inquiry into the insurance industry’s response to the 2022 floods which cost $5.8 billion and devastated parts of south east Queensland and NSW.

John McCarthy

Jul 19, 2023, updated Jul 19, 2023

The government will hold an inquiry into the 2022 flood response (AAP Image/Jason O'Brien)

The insurance industry has welcomed the inquiry and pointed to the incredible statistics emerging from that year in which a quarter of all Australians lodged an insurance claim and claims across all categories reached $36 billion.

It has also urged the inquiry to examine the impact of state insurance taxes on customers’ capacity to appropriately insure, as well as how the impact of past decisions on land use planning and disaster mitigation impact community risk and insurability.

The inquiry would take a whole‑of‑economy view of the ongoing challenges faced during intense and frequent flood events and would investigate the preparedness of insurers to respond to the frequency of these events.

It would also consider supply chain issues, skills, and labour shortages, claims handling, and communication with policy holders before, during and after these devastating events.

Assistant treasurer Stephen Jones said natural disasters continued to have a massive impact on the lives of Australians, especially those in rural and regional communities.

“The 2022 floods in South‑East Queensland and NSW are the costliest natural disaster for insurance costs in Australian history,” he said.

As of June 2023, the ICA estimates the February‑March 2022 floods in South‑East Queensland and NSW have caused $5.87 billion in insured damages, but continued flooding over the rest of the year pushed that figure to $7.17 billion.

“This is why the Federal Government has formalised its commitment of up to $1 billion over five years from 2023‑24 (up to $200 million per year) to invest in measures that better protect homes and communities from extreme weather through the flagship Disaster Ready Fund,” Leigh said.

The Insurance Council of Australia welcomed the announcement.

2022 was a record year for insured losses, driven by flooding in Northern New South Wales and South-East Queensland in February-March, in the Hawkesbury-Nepean in July, across three states in October, and in the Central West of New South Wales in November.

Those events have so far cost $7.17 billion in insured losses from more than 300,000 claims. In response, the Insurance Council and insurers held 59 community forums across flood-impacted regions, directly assisting more than 1,900 insurance customers in four states including in the Central West of New South Wales.

The Insurance Council commissioned its own independent review of insurers’ response to the February-March 2022 floods, which is due for release in October.

That review was tasked with identifying the lessons learned from insurers’ response to the floods and urged the inquiry to examine the impact of state insurance taxes on customers’ capacity to appropriately insure, as well as how the impact of past decisions on land use planning and disaster mitigation impact community risk and insurability.

ICA chief executive Andrew Hall said that in 2022 insured losses across all categories totalled $36.5 billion from 5 million claims – meaning last year one quarter of adult Australians made an insurance claim.

“Following three years of La Niña conditions and the pandemic, the 2022 floods stress tested the systems insurers use to respond to customers,” Hall said.

“This was exacerbated by issues such as a shortage of expert assessors, building labour and materials constraints, and the complexity of recovery and resilience programs delivered by state governments.”

Topics: floods, insurance, response

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