‘This is a real test’: Insurers told to lift their game as cyclone approaches

The nation’s biggest insurers have been warned to lift their game when dealing with vulnerable Australians in the path of Cyclone Alfred, the biggest natural disaster to hit the country since the 2022 floods that wreaked havoc across the east coast.

The Australian Securities and Investments Commission’s Alan Kirkland said after their poor handling of the 2022 floods that smashed parts of Queensland, NSW and Victoria, insurers would need to deploy staff to recovery centres, talk to victims face-to-face and hold community meetings as soon as it was safe to do so.

The cost of Cyclone Alfred, which is set to cross Queensland’s coast near Moreton Bay, north of Brisbane, in the early hours of Saturday morning, is expected to top $2 billion.Credit: Danielle Smith

“Where the really important work happens is how they then manage that claim from then on. And the sorts of problems that we saw last time [with the 2022 floods] were people telling us that sometimes eight or more months later they didn’t know what was happening … they often had to speak to multiple employees and tell their story again from the beginning; they would have tradespeople appear at their house; and insurers weren’t keeping them informed about what’s happening,” Kirkland said.

Australian Consumers Insurance Lobby chair Tyrone Shandiman said he hoped the industry had paid heed to recommendations from the parliamentary inquiry into the sector’s response to the floods in 2022.

“This is a real test. This is a real test to see if the learnings from 2022 have even been implemented or will be,” Shandiman said.

The cost of Cyclone Alfred, which is set to cross Queensland’s coast near Moreton Bay, north of Brisbane, in the early hours of Saturday morning, is expected to top $2 billion, said S&P Global Ratings. Shandiman said affected households should keep the following issues in mind when dealing with their insurer:

How should I prepare my insurance claim for Cyclone Alfred?

Shandiman says consumers should notify their insurer immediately after noticing damage.

“What can happen is if people go and start repairs with the insurers, by all means if there is urgent action you can take to prevent a loss or to minimise a loss there are protections in policies and in the insurance contracts for doing that, but the best thing to do is to call your insurer immediately and get the claim lodged.”

When should I claim on insurance?

As soon as you notice damage to your property, Shandiman says.

If I’m renting, what are my options?

There are specific contents insurance products that are available for renters to cover the damage to your belongings, with some of the policies also covering the costs of moving out and finding accommodation.

“If your property is uninhabitable, you can certainly talk to your landlord about your rental arrangements and having your rent stopped or paused or even your rental agreement terminated if the property is uninhabitable,” Shandiman says.

What are my rights when claiming insurance for the cyclone?

“The best way to understand your rights is to know your policy,” Shandiman says. “Cyclone is a standard inclusion in policies around Australia. So the only real caveat there is if there’s a major cyclone excess, and that applies to certain policies like large industrial commercial policies, and some strata policies might have them as well.”

How should I contact my insurance company?

“The best thing to do is to have your policy handy and call [your insurer], and they can get a claim under way straight away,” Shandiman says.

The industry’s response to the tropical cyclone will come under heavy scrutiny from the regulator, consumers and politicians in the lead-up to the federal election, which will be fought on cost-of-living issues. Rising insurance costs have been a key driver of inflation, prompting Opposition Leader Peter Dutton to threaten last month to break up insurance companies to lower premiums.

The parliamentary inquiry into the 2022 floods heard testimony from victims treated poorly by insurers when their homes were flooded, finding many people were unable to move back into their homes two years on from the natural disaster and insurers had been low-balling households with inadequate cash settlements.

ASIC Commissioner Alan Kirkland has put the insurance industry on notice to lift its game.Credit: Oscar Colman

Kirkland said many victims felt the insurers had failed to respond to their needs promptly, and he was hoping to see an improvement on that front.

“It’s really important that insurers have a good immediate response because people are dealing with an immediate trauma, but it’s equally important they manage the claims effectively in the months that follow,” Kirkland said.

Nick Hawkins, chief executive of IAG whose brands include NRMA and RACV, said while the organisation had learnt the lessons of those floods and was better prepared, the macroeconomic environment had also changed.

“[In 2022] we had all sorts of supply chain issues, access to skilled labour, we’d only just opened our borders, so it was a very difficult time to be ready for such an event,” Hawkins said.

“To play forward to today, many of those issues we don’t have, and we’ve certainly learnt from some of the things that occurred during those floods, and they are now part of our business model.

“Even something like what I’m sitting in here right now, the major event command centre – we have a way more sophisticated version of that today than we had three years ago.”

IAG’s command centre has information on its 250,000 customers who are in the path of Cyclone Alfred, which is expected to hit residents from the Sunshine Coast in Queensland to the Northern Rivers region of NSW. Federal Treasurer Jim Chalmers said this week that there were about 4.5 million Australians and 1.8 million homes in the affected areas.

Hawkins said additional assessors and mobile claims centres had been deployed to Brisbane, while the New Zealand team was also on standby.

Federal Labor MP Daniel Mulino, who chaired the parliamentary inquiry into the 2022 floods, said it was critical that insurers dealt sensitively with policyholders, some of whom may have still been rebuilding their homes after the floods of 2022. The industry provided evidence that they had increased staff training, Mulino said.

“A number of these communities are still recovering,” he said. “Even before this storm formed, Lismore had held a three-year anniversary event to kind of celebrate the resilience of their community. And it would be very difficult for many in that community to have this storm and then all the uncertainty in the lead up to it.”

Tropical Cyclone Alfred as seen from the International Space Station.Credit: Nine News

Suncorp, which has the largest footprint in Queensland, said mobile disaster response hubs, assessors and builders were on standby to be deployed as soon as it was safe to do so.

“The challenges ahead will be complex, with multiple hazards expected to impact a large geographical area that includes both regional and urban communities,” chief executive Steve Johnston said in a statement. “We now have a good idea of where the cyclone is going to hit and which customers, homes and businesses are in the threat zone.”

QBE said its claims team had the resources available to support affected customers, with teams on standby particularly in high-risk areas across Brisbane, the Gold Coast and the Sunshine Coast.

”As severe weather events become more frequent, it’s crucial that governments, insurers and the construction industry work together to enhance community resilience through improved risk mitigation strategies and updated building codes,” a spokeswoman said. These events highlight the need for proactive measures and stronger infrastructure to protect communities, reduce recovery costs and help build long-term insurability.”

UBS analyst Kieren Chidgey said while the federal government’s Cyclone Reinsurance Pool would provide significant protection for insurers – and help keep premiums lower for policyholders – insurers could still be exposed to residual flood risk and motor claims.

He said Suncorp would be most exposed, given it commands 22 per cent of the market share in Queensland, compared with IAG – the second-largest insurer in the sunshine state – with a 6 per cent market share.

The NSW SES has responded to more than 1100 incidents as weather brought by Tropical Cyclone Alfred worsens.Credit: Getty

“We have been anticipating that pricing across home insurance and motor insurance will moderate from double-digits, and while for motor insurance this event is unlikely to change that trajectory, for home insurance that could have more of an impact on slowing the price moderation over the course of the year,” Chidgley said.

“Reinsurers globally got up to a fairly bad start with the Los Angeles wildfires. This event is too early to call how large it will be in the context of global catastrophe losses, which is around typically $150 billion a year. It won’t be a significant event in isolation to move the dial on global reinsurance pricing, but it adds to the higher start to the year.”

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