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Bernie Ripoll

Parliamentary Secretary to the Treasurer

5 March 2012 - 18 September 2013

Speech of 24/05/2012


Statement to the Insurance Australia Group Risk Matters Summit

24 May 2012

Video courtesy of IAG Risk Matters Summit

Welcome to the Insurance Australia Group Risk Matters Summit and thank you for the opportunity to record this statement as part of your deliberations. My name is Bernie Ripoll and I am the Parliamentary Secretary to the Treasurer.

The last two years have been amongst the worst ever in Australia for natural disasters.

After years of drought, many parts of Australia suffered terrible floods. Some areas of Australia have been flooded three times over in the last three years.

There have also been other natural disasters, including considerable hail storms right across Australia - most recently striking Melbourne on Christmas Day 2011.

These natural disasters were obviously very tough for people directly affected and many people are still recovering, months or even years after the event.

I think that it's also important to acknowledge that these events are very difficult for the insurance industry and its thousands of employees as well.

The employees of insurance companies have to put in incredibly long hours - often at short notice - in order to be able to handle the surge of claims that inevitably flow from a serious natural disaster.

Today I want to outline some initiatives the Government is working on in relation to risk management - particularly in relation to natural disasters.

The risks arising from natural disasters are currently managed by a combination of private insurance markets and government assistance.

On the whole, the system works.

And I should stress that this Government remains committed to the notion that government should only intervene in the management of private risks where there is market failure.

However, there were aspects of the insurance industry - and the governments - response to the floods in 2010/11 that could be improved.

There was certainly too much confusion in relation to coverage.

There were also a number of claims that took too long to process - albeit that only a very small minority of claims were delayed for significant periods of time.

In response to the major disasters of 2010/11, the Gillard Government commissioned the Natural Disaster Insurance Review to advise on how both government and industry can do a better job.

The three guiding principles that underpinned both the review and the government response were that:

  1. individuals and businesses should insure themselves where ever possible;
  2. government should only intervene if there is a clear market failure - as I've already noted; and
  3. there should be appropriate mitigation of flood risk.

On 30 September last year, the Government received the NDIR report.

The Government released its response to the report in November 2011 and has already acted on many of the recommendations.


For flood cover, we've cut through some of the fine print to make sure that people have more certainty as to their coverage when disaster strikes.

The standard definition of flood will mean that people living next to each of other aren't treated differently just because their policies contain different definitions.

We have undertaken extensive consultation on the precise wording of the standard definition and the use of the standard definition has already passed both houses of Parliament, with a release of the actual definition of the words to be released in the next few weeks.

The one page key facts statement means that it will be much clearer to people what is covered and what is not covered by their policies.

Improving the operation of the Code of Practice

The NDIR report recommended a number of changes to the General Insurance Code of Practice.

The Government and industry have already been able to agree on a number of significant changes to the Code:

  1. Insurance companies will no longer be able to exempt themselves from the operation of the Code simply because there is a natural disaster;
  2. The Code will contain a 4 month time limit for the provision of a determination to a customer; and
  3. The Code will contain a time limit for the completion of expert reports - including hydrology reports, which caused so many of the delays in 2010/11 - and also that consumers should have and will have the right to access these reports.

Other changes will be considered as part of the review of the Code that was recently announced by the ICA.

Affordability measures

The NDIR also recommended a series of measures to deal with the affordability of flood insurance for households at high risk. This included the establishment of a pool for high risk households.

These measures will be considered in more detail later this year.

In conclusion, the frequency of natural disasters over recent years has raised the profile of risk management particularly in relation to natural disasters.

This Government acknowledges the good work of the insurance industry in managing many of the community's risks - and also the willingness of the industry to work with Government both during and after disasters strikes.

However the events of the past two years have shown that occasionally, intervention is justified in order to make markets work more effectively.

This intervention will be most effective where it is designed for the specific market failure being addressed and where it is developed in close consultation with both industry and consumer representatives.

I hope that, together, we can continue to build on the good reforms that I have outlined in this statement today and wish you all the best in your work and in the outcomes of the Summit.