FUTURE
INSURANCE
AFFORDABILITY
SCOPE
PARTNERSHIP
PREP
PREMIUMS
PARTNERSHIP
PREP
PREMIUMS
PROBLEMS
How are they calculated?
What is driving increases?
Improving information
& controls
23 SEPTEMBER 2010
FORGOTTEN FACTS
•
The Private Insurance market is critical to the Australian Economy
•
The industry pays out 98.6% of claims lodged, delivering over $22
billion to the community annually.
•
There is no such thing as universal cover, every product has limits,
disclosed to the consumer.
•
Insurance is heavily regulated to prevent insurer insolvency.
21 OCTOBER 2010
THE COSTS OF EXTREME WEATHER EVENTS
ARE INCREASING
Source: Crompton and McAneney , 2008. Environ. Science & Policy)
Sydney Hailstorm TC Tracy Brisbane Floods
AB
S
–
Mean V
alue of House
s
130k 70k 30k 100k TC Tracy Brisbane Floods21 OCTOBER 2010
THE COSTS OF EXTREME WEATHER EVENTS
ARE INCREASING
Source: Crompton and McAneney , 2008. Environ. Science & Policy)
Sydney Hailstorm TC Tracy Brisbane Floods
AB
S
–
Mean V
alue of House
s
130k 70k 30k 100k TC Tracy Brisbane FloodsTHROUGH AN INSURERS EYES
The most significant factor driving the changing risk profile
is growth in the built environment and population density
….
Governments are
responsible for
enacting
regulations to
achieve a low risk
environment for
the community.
However, there
are many
different
approaches
taken.
LONG
TERM
PROPERTY
INSURABILITY
IS DEPENDENT
ON RISK CONTROLS
Community members (through purchasing insurance) can
accommodate a reasonable level of residual risk in the built
environment - achieved through application of three principles.
Insurers rely
upon an
understanding of
the risk controls
in place in order
to determine
residual risk.
Often insurers
have no detailed
information upon
which to rely.
HAZARD MITIGATION
CONTEXT
Can insurance pricing and affordability be improved
by Local Government and Insurers connecting
through a common approach to measuring insurable
EXAMPLE SCENARIO
Residential Property on a known Floodplain
• No detailed flood mapping available to insurers
• No knowledge of resilience measures at property level
• No knowledge of any flood mitigation measures implemented Result – Insurer acts prudentially and assumes highest level of risk exposure to property
EXAMPLE SCENARIO
Residential Property on a known Floodplain
• No detailed flood mapping available to insurers
• No knowledge of mitigation measures at property level
• No knowledge of any flood mitigation measures implemented Result – Insurer acts prudentially and assumes highest level of risk exposure to property
Residential Property on a known Floodplain
• Detailed flood mapping available – Hazard precisely known • Building understood to be designed to be resilient to Hazard
Result – Insurer able to use improved risk information to accurately price the lower or more certain risk.
Detailed Flood Map
Flood Resilient by Design
EXAMPLE SCENARIO
Detailed Flood Map
Flood Resilient by Design
WHAT DOES THIS MEAN?
In many locations there is a potential disconnect between authoritative hazard data and the protection given by
development controls, with insurance risk pricing.
Without carrying out any further mitigation works there is a potential to influence insurance affordability by improving data availability.
WHAT IF INSURERS KNEW THIS
INFORMATION?
PREP Scoping & Discussion Update 10 July 2013
Property
Resilience &
Exposure
Program
Building Resilience Rating Tool +
Building Resilience Knowledge Database +
Surveyed building data +
Hazard overlay on land parcels
LOCAL GOVERNMENT WITH DEVELOPMENT CONTROLS IN PLACE BUT WITH PERCEIVED AFFORDABILITY ISSUES
INSURERS ATTEMPTING TO PRICE RESIDUAL RISK WITH LITTLE
CLARITY ON HAZARD AND DEVELOPMENT CONTROLS.
Property
Resilience
Overlay
Identification of well performing development controls Quantification of value of existing mitigation
Identification of residual mitigation priorities
Ability to influence insurance risk analysis of region
Reduced uncertainty of hazards in region
Acknowledgement of existing mitigation in place
Acknowledgement of development controls that work Ability to assist local government with future decision on development, planning and mitigation.
5% ARI
1:20 Flood Risk
1.8
4.3
1967 Weatherboard Aluminium Roof
Low set particle board flood
2007 Steel Frame & Pole Steel Roof
PREP Scoping & Discussion Update 10 July 2013
EXAMPLE
RESILIENCE HEAT
MAP
Governments are
responsible for
enacting
regulations to
achieve a low risk
environment for
the community.
However, there
are many
different
approaches
taken.
LONG
TERM
PROPERTY
INSURABILITY
IS DEPENDENT
ON RISK CONTROLS
Community members (through purchasing insurance) can
accommodate a reasonable level of residual risk in the built
environment - achieved through application of three principles.
Insurers rely
upon an
understanding of
the risk controls
in place in order
to determine
residual risk.
Often insurers
have no detailed
information upon
which to rely.
HAZARD MITIGATION
STATUS
Can insurance pricing and affordability be improved
by Local Government and Insurers connecting
through a common approach to measuring insurable
LONG
TERM
PROPERTY
INSURABILITY
IS DEPENDENT
ON RISK CONTROLS
HAZARD MITIGATION
STATUS
Can insurance pricing and affordability be improved
by Local Government and Insurers connecting
through a common approach to measuring insurable
residual risk to property.
YES
Development of PREP
- Pilot program underway
- Actuary study on value of resilience overlay
- Insurer valuation of benefit of refined hazard data - Local council valuation of program value
- Mitigation prioritisation study
Post Validation Next Steps
- Insurer discussion with States - Program comercialisation