SABRA LANE:
If you received your home insurance renewal recently, you'll know premiums are skyrocketing. The median price has gone up 28 per cent in the past year, according to the Australian Actuaries Institute and in flood-prone areas, that figure's 50 per cent. The federal government knows it's a big problem. Parliament set up an inquiry into it.
The Assistant Treasurer and Financial Services Minister, Stephen Jones, has just returned from a trip to Europe where he's met with reinsurers the insurers for insurance companies. He joined me earlier.
Stephen Jones, your aim was to find out how to lower the cost of insurance in Australia. What did these reinsurance companies tell you?
STEPHEN JONES:
They told us that what Australians are experiencing in their rising costs of insurance is something that's going on in a lot of other countries like us around the world, whether it's New Zealand, Japan, North America, parts of the UK, a similar thing. Reinsurance companies, these are the guys who insure the insurers. They're repricing risk right around the world. They're taking account of more severe and frequent severe weather events and they're taking into account climate change and that's starting to be reflected in our premiums.
SABRA LANE:
Some of these companies, though, were telling you about Roma in Queensland, which installed a levee through the town. What was their message about that?
STEPHEN JONES:
I really wanted to find out the things that the government could do to make a difference, to help households. And simply, they said, the worst thing you can do is subsidies. The best thing you can do is look at mitigation. And from a government point of view, that means better infrastructure, but it also means stop doing dumb things like building the wrong houses in the wrong places. And that was a very strong message. They want to see that Australian governments understand that the climate is changing, that we can't be building houses in the bottom of floodplains and if we do, that's going to affect everyone's premiums. Strong message for us to take back to Australia.
SABRA LANE:
All right. And just on that point, Australia has experienced in past couple of years that La Nina with heavy rains and flooding, to say that, you know, homes shouldn't be built on floodplains. How do you actually enforce that? Because that comes down to, ultimately, local councils.
STEPHEN JONES:
Local councils, state governments have a role in this and there's a National Cabinet agenda item to look at what we can do to improve these processes. So, the Albanese government has put this on the national agenda. Quite simply, if we keep doing the same thing, we're going to get the same or a worse response. So, building new suburbs or the wrong houses in the wrong places is not the answer. We've got to stop making a bad situation worse before we start looking at additional mitigation efforts, which is about firming up and improving our defences in existing suburbs.
SABRA LANE:
And just on those mitigation measures, the government has got a Disaster Ready Fund. It's spending $200 million a year on better preparing communities. Given what you heard those companies say about Roma, how best can you spend that money now to ensure that you protect as many people as possible while also helping put downward pressure on premiums?
STEPHEN JONES:
This has all got to be driven by data, Sabra, which is why we've set up the Hazard Insurance Partnership at the national level. It's about sharing data around flood and around the impact of flood in particular, because that's the big driver of insurance costs and the sorts of infrastructure that might be put in place at a community level, which could help protect suburbs, protect houses, and not make the bad situation worse. So, we're pulling together that data at the national level now. The sorts of things that I was keen on hearing from the global reinsurers is if we've got $200 million to spend as a minimum on an annual basis, if we do it like this, is it going to affect insurance premiums? And if we do it like that, is that going to have an impact? And they knew about Roma. They knew about the levies that we put in place in Roma. They knew how it prevented future floods in that area and how that was priced into their insurance premiums as well. So, it was a good example about how we can do things differently and a good example about how the global industry is pricing and looking very closely about what we're doing here in Australia.
SABRA LANE:
And just to be absolutely clear, they're pricing on premiums where you've got those mitigation measures in place, those prices come down.
STEPHEN JONES:
That's right. They take into account those things. It's got to be real, it's got to be meaningful. And we've got to do a better job as an Australian Government of ensuring that when we do things that that's communicated strongly and quickly to these global businesses as they're putting in place what are some of the most sophisticated data sets on weather and on climate and on local impact of weather and climate anywhere in the world. These guys are big data, to the power of ten, and they're using it to price things, not only in Australia, but right around the world.
SABRA LANE:
You can't put levees in every town or bridges in every town. How quickly are you going to make those decisions?
STEPHEN JONES:
We've put aside a billion dollars, and that's just a start. But of course, it's not just what we're doing through the Disaster Ready Fund. These things have got to be factored into planning and infrastructure spend and infrastructure build as a part of business as usual. If we're building new bridges, if we're building new dams, if we're building new roads, we've got to ensure that as a part of the design of that, we're making the local communities more resilient to severe weather events because we know they're going to happen.
SABRA LANE:
To Qantas. The former Qantas boss, Alan Joyce, could face the prospect of jail time if he fails to front up to a Senate inquiry into blocking the extra flights from Qatar, the chair is threatening to summons him if he doesn't appear. How important is it he appear?
STEPHEN JONES:
Well, I think it's important. All the other senior officials of Qantas have appeared. These are the guys who are cleaning up the mess that Alan Joyce has left. I think the very least that he can do was to front up and explain himself and the decisions that have been made on his watch. He gets no special treatment. It's the same as any other citizen who's asked by the Senate to come and explain in the public interest what's gone on. So, he should be treated no different to anyone else.
SABRA LANE:
Stephen Jones, thanks for talking to AM.
STEPHEN JONES:
Good to be with you.