The Assistant Treasurer, Bill Shorten, has today announced a review into disaster insurance in Australia. The Review will concentrate on insurance arrangements for individuals and businesses for damage and loss associated with flood and other natural disasters.
"This Review provides an opportunity for an independent review of issues relating to insurance in light of the recent disasters, in the context of the long term funding of disaster relief," Mr Shorten said.
"It will provide answers about how individuals and communities affected by the floods and other natural disasters are able to recover and rebuild as quickly as possible. We want all Australians to be able to choose where they live in an informed way."
"We also need to ensure individuals and communities at risk of extreme weather events are aware of the risks but are able to obtain suitable protection against those risks, both in terms of having access to insurance and benefiting from appropriate mitigation strategies."
The National Disasters Insurance Review will be chaired by Mr John Trowbridge, with Mr John Berrill and Mr Jim Minto as members. It will report back to Government by the end of 2011.
Recent widespread flooding and other extreme weather events have caused devastating losses, which have been borne by individuals and businesses, State and local Government, community organisations, the Australian Government, private insurers, and reinsurers
The Australian Government is concerned that appropriate national measures are in place to foster more complete sharing of risk and equitable sharing of the cost of damage and loss resulting from floods and other natural disasters.
The review will consider a number of specific issues, including:
- The extent of, and reasons for, non-insurance and underinsurance for flood and other natural disasters in Australia
- The ability of private insurance markets to offer adequate and affordable insurance cover for individuals, small businesses and governments for flood and other natural disasters
- Factors that may impede the private insurance market in offering such cover
- Measures that could improve the ability of the private insurance market to offer such cover and the take-up of such cover by individuals, small businesses and governments
- Whether there is a case for subsidising insurance premiums for individuals and small businesses in the areas of highest risk facing the highest premiums.
- Whether there is a role for the Commonwealth Government in providing disaster insurance or reinsurance to the private sector, through mechanisms such as a national disaster insurance program, and, if so, what are the best options
- The impact or likely impact of any Commonwealth Government intervention in disaster insurance on the private insurance market
- The relationship between disaster mitigation measures taken by State and local governments against flood risks, and the impact of such measures, or the lack of them, on the availability and affordability of flood and other disaster insurance.
"I'm also pleased that after discussions with Senator Fielding on the flood levy package the Terms of Reference will also consider the existing Commonwealth and State arrangements for dealing with natural disaster recovery and resilience and whether it should be supplemented by the establishment of a national disaster fund."
"The Review process will not detract from the Government's ongoing work with the insurance industry about a standard definition of flood and plain English in insurance contracts. In fact, the Review will complement those ongoing discussions and provide a better understanding of exactly who should bear and manage risk in such tragic events."
"I look forward to the Review's outcomes and to continuing the discussion with Australians about how we can better prepare for these catastrophic events in the future," Mr Shorten said.
4 March 2011
Biographies of Panel members:
John Trowbridge
John Trowbridge completed in 2010 a four year term as one of three Government-appointed executive members of the Australian Prudential Regulation Authority (APRA), Australia's national prudential regulator for banking, insurance and superannuation. He had carriage at APRA of life and general insurance and also executive remuneration. During this time he was also a member of the Executive Committee of the International Association of Insurance Supervisors and a member of Australia's Financial Reporting Council.
Before joining APRA, John had spent the larger part of his career as a consultant, having founded Trowbridge Consulting in 1981, a firm which was known as an insurance specialist and became a leading actuarial and management consulting firm in Australia and Asia during the next 20 years. It merged with Deloitte in 2000. He had previously worked with Commonwealth Treasury in the Government Actuary's Office and had also held senior executive positions with QBE Insurance. After completing his consulting career in 2002, he led Suncorp's insurance business for a period and was subsequently a local director of Munich Reinsurance.
He has undertaken a very wide range of consulting assignments in his time and has developed a reputation as one of Australia's foremost experts in general insurance.
He was President of the Institute of Actuaries of Australia in 1998, served as a member of the Australian Treasurer's Financial Sector Advisory Council from 1998 to 2004, was awarded a Centenary Medal in 2001 and was named Actuary of the Year in 2006.
John Berrill
John Berrill is a Principal at Maurice Blackburn and is the head of the largest national plaintiff Superannuation and Insurance Claims practice in Australia.
John has more than 15 years experience in superannuation, insurance and financial services law and is an accredited personal injuries specialist.
He was a consumer representative on the Financial Industry Complaints Service Panel and Board until 2009. He is a consumer representative on the Travel Compensation Fund Board and the Financial Ombudsman Service life insurance advisory committee.
He was a founding member of the HIV/Aids Legal Centre and is also a member of the Consumers Federation of Australia, the Chronic Illness Alliance and the Australian Lawyers Alliance.
John provides legal advice to many disability support groups, social work departments, unions and consumer groups, and acts for workers and people with chronic illnesses and disabilities against insurance companies and superannuation funds
Jim Minto
Jim Minto joined TOWER in New Zealand in 1988 as Managing Director of the Group's Trust business.
He went on to run several of the other TOWER Limited businesses – Managed Funds, Health Insurance, Life Insurance and General Insurance – before taking on the role of Group Managing Director of the trans-Tasman TOWER Limited Group.
When the TOWER Limited Group demerged in 2006 Jim was appointed Managing Director of TOWER Australia, which is now the third largest Life Insurer in Australia by premiums.
A Chartered Accountant, Jim holds a number of other directorships and has been active in industry bodies throughout his career. He is currently on the Board of ASFA.
Jim Minto is a strong public advocate for the social importance of the Life Insurance industry to the people of Australia.
Terms of Reference
Background
- Recent widespread flooding and other extreme weather events have caused devastating losses across the nation. These losses have been borne by individuals and businesses, State and local Government, community organisations, the Australian Government, private insurers, and reinsurers
- The Australian Government seeks to ensure that:
- Individuals and communities affected by the floods and other natural disasters are able to recover and rebuild as quickly as possible.
- People are able to choose where they live in an informed way.
- Individuals and communities at risk of future flooding or other extreme weather events are aware of the risks but are able to obtain suitable protection against those risks, both in terms of having access to insurance and benefiting from appropriate mitigation strategies.
- The Australian Government is concerned to ensure that the appropriate national measures are in place to foster more complete sharing of risk and equitable sharing of the cost of damage and loss resulting from floods and other natural disasters throughout the nation. This Review is established to examine how best to achieve these objectives.
- The National Strategy for Disaster Resilience adopted by COAG on 13 February 2011 outlines the shared responsibility of individuals, governments, businesses and communities in preparing for, and responding to, disasters.
- As part of the National Strategy, the Commonwealth, States and Territories will be working together to support strategies to foster greater individual and community resilience, including having adequate and appropriate levels of insurance cover, and the Heads of Treasuries will provide a report to the National Emergency Management Committee (NEMC) on insurance by the end of 2011.
- This Review provides an opportunity for an independent review of issues relating to insurance in light of the recent disasters, in the context of the long term funding of disaster relief. The Assistant Treasurer and the Attorney-General will provide the outcome of the Review to the Heads of Treasuries for consideration in the context of their report to the NEMC.
Objective and scope
- The Review should be guided by the following principles:
- Government intervention in private insurance markets is justifiable only where, and to the extent that there is clear failure by those private markets to offer appropriate cover at affordable premiums.
- The appropriate mitigation of risk by individuals and governments at all levels is a key objective.
- Individuals and businesses should be encouraged to insure themselves where practicable.
- The Review will consider the arrangements for the insurance of the assets of Australian individuals, small businesses and governments for damage and loss associated with flood and other natural disasters. In particular, the Review will consider:
- The extent of, and reasons for, non-insurance and underinsurance for flood and other natural disasters in Australia.
- The ability of private insurance markets to offer adequate and affordable insurance cover for individuals, small businesses and governments for flood and other natural disasters.
- Factors that may impede the private insurance market in offering such cover.
- Measures that could improve the ability of the private insurance market to offer such cover and the take-up of such cover by individuals, small businesses and governments.
- The need for any further measures to enhance:
- consumer awareness and understanding of the scope and coverage of available insurance products.
- claims management, dispute resolution and consumer assistance and advocacy services.
- The effect or likely effect of the recent floods and other natural disasters on future insurance premiums in respect of such cover.
- Whether there is a case for subsidising insurance premiums for individuals and small businesses in the areas of highest risk facing the highest premiums.
- Whether there is a role for the Commonwealth Government in providing disaster insurance or reinsurance to the private sector, through mechanisms such as a national disaster insurance program, and, if so, what are the best options.
- The impact or likely impact of any Commonwealth Government intervention in disaster insurance on the private insurance market.
- The relationship between disaster mitigation measures taken by State and local governments against flood risks, and the impact of such measures, or the lack of them, on the availability and affordability of flood and other disaster insurance.
- The Review will also consider whether the existing Commonwealth and State arrangements for dealing with natural disaster recovery and resilience should be supplemented by the establishment of a national disaster fund to support the rebuilding of public infrastructure in the aftermath of events such as the recent floods.
Composition and consultation
- The Review Panel will be chaired by Mr John Trowbridge, with Mr John Berrill and Mr Jim Minto as members.
- The Review Panel will be assisted by the Australian Government Actuary, Mr Peter Martin.
- The Review Panel will be supported by a working group from within the Treasury, with representation from the Department of Finance and Deregulation and the Attorney-General’s Department, and drawing on other government agencies as appropriate.
- The Chair may task members of the Review Panel to oversee programs of work related to their field of expertise.
- The Review Panel will consult with the public to allow for community and business input.
- The Review Panel will consult with State and Territory governments.
- The Review Panel will also, where necessary, draw on external expertise and comparative international best practice.
- The Review Panel should provide a final report setting out its recommendations to the Assistant Treasurer by no later than 30 September 2011.
- The final report will also be provided to the Commonwealth Attorney-General as chair of the Ministerial Council for Police and Emergency Management –Emergency Management (MCPEM-EM) for consideration in implementing the National Strategy for Disaster Resilience as agreed by COAG in February 2011.