Federal Government revives push for perils standard definitions

The Federal Government says it will move ahead on the development of standard definitions for “certain natural hazards” in insurance contracts, reviving a proposal that has been recommended in inquiries over recent years.

A statement released following a $22.6 million Budget allocation targeting insurance measures, also says the standard cover regime will be reviewed to improve consumer understanding of products.

The Budget provides for the creation of a Hazard Insurance Partnership and Strategic Insurance Project that aims to address rising premiums and help communities be better prepared for disasters.

Assistant Treasurer and Financial Services Minister Stephen Jones says the initiative will support better outcomes for businesses and individuals.

“It is vital that we make coverage for natural hazards easier to understand when taking out an insurance policy,” Mr Jones said. “These reforms will help ensure that Australians can obtain adequate insurance for their homes and businesses.”

The Government says the Australian Climate Service will establish a dataset on affordability, underinsurance, and non-insurance issues to help inform policy design and measure progress, while a national mitigation measure knowledge base will provide policy holders with mitigation options to reduce property risks.

Mr Jones says the Government will drive investment in community level risk reduction through public-private sector partnerships that identify and fund risk reduction measures that will put downward pressure on premiums.

Emergency Management Minister Murray Watt says the Government wants to identify the most pressing issues in high-risk areas and test the best policy solutions to reduce insurance costs. The measures are taking place alongside the previously announced commitment for up to $200 million a year funding on mitigation and resilience.

“As we have seen over the past month, the risk of natural disasters is increasing in many areas of Australia,” Mr Watt said. “That is driving up the cost of insurance, leading people to underinsure and in some cases, not even take out insurance.”

Insurance Council of Australia CEO Andrew Hall says the community expects industry, governments, and stakeholders to work together and the hazards partnership creates a mechanism to allow that to happen.

“There is much detail to work out and we look forward to working collaboratively with both the federal and state governments on this very strong start to solving a long-term problem,” he said.

See Analysis.