SABRA LANE:
The damage bill from the floods will run into the billions. Stephen Jones is the Federal Assistant Treasurer and the Financial Services Minister. We spoke earlier.
Stephen Jones, it's still very early in the aftermath of the cyclone and floods. I think insurance companies have received close to 4000 claims so far. How quickly are they processing those claims?
STEPHEN JONES:
Look, the focus until now, Sabra, has been the emergency response onto the initial emergency response. We're now shifting to the clean-up. I've spoken to the insurance council and they've told me that they'll have people on deck, most of them have people on deck up there now talking to customers directly, but by next week all of them will have a presence in town. We expect those claims to be dealt with promptly, fairly and efficiently. And I take some heart from the way that has been dealt with in the recent flood event in Lismore. I think insurers have lifted their game, but I can guarantee your listeners that the government will be watching very closely.
LANE:
Yeah. Some of the pictures coming out of Cairns and the surrounding areas show mammoth damage.
JONES:
Yeah, a lot of damage up there. And the bill for this one will go into the billions. Important that we have close coordination between the Federal Government, the State Government and the local authorities up there. We've all got to be working together and we need the insurance industry to have their assessors up there on the ground because there's going to be a big call on local tradespeople to be involved in the clean-up as well. So, first step, emergency response. Second step, having those claims assessed, and then the third step is the rebuild. We also know, Sabra, that there's a lot of people up there who don't have insurance or who might be underinsured. And we're working through what we can do to assist those people as well, to ensure that nobody's left behind as we make the big clean-up effort.
LANE:
Yeah. How much of a problem is that? Due to cost of living pressures, many people have dropped their insurance or they're vastly underinsured themselves. Are they on their own?
JONES:
That's what we're working through at the moment to ensure that there is some assistance. So, the immediate disaster relief payments have started to flow to impacted families up there at the moment, impacted businesses up there at the moment, and that will continue over the medium term. We've got to look at how we're dealing with insurance to ensure that it's appropriately tuned to provide assistance and to cover for risks. What we're experiencing in Australia is part of a global phenomena with reinsurers and global insurers starting to factor in the impact of climate change and the impact of those severe weather events and the risks associated with them in insurance policies. So, we've got to ensure that as a government here in Australia, which is more affected than most, we're putting in place the right sort of disaster resilience that involves everything from the way we're building our infrastructure to where we're locating our suburbs and how we're designing our homes.
LANE:
Underinsurance is always a problem following big disasters. Is there a better way to help people estimate the true cost of their homes and possessions to avoid this issue?
JONES:
These are the things we're working through. In fact, we made a start after the last election with our hazard insurance partnership, ensuring that we can get better access to the data about what works and make that available to consumers about the things that they can do to reduce their risks, to make their houses and their communities more resilient, have that reflected in their insurance premiums. Early days, yes, a lot of work to be done in this area. But we want to ensure, just in the same way as if you put locks and bars on your windows, you get a reduction in your home and contents insurance, the sort of equivalent to making your house more resilient in the face of severe weather events, how that can affect your insurance premium as well. But over the course of the next year, we're going to have to look at insurance in this country and be very mindful of what's going on around the rest of the world as well.
LANE:
You're planning a town hall meeting in the next week or so in Cairns. What's the aim of that?
JONES:
We want to ensure that we're bringing the insurers together, we're bringing the local representatives together and having all the information available to people. We want to get ahead of things, Sabra. We don't want to be in a situation where issues are coming up, complaints are coming forward and we haven't pre-empted them. So, we want to get ahead of things in ensuring that what is in a very difficult time for locals up in Cairns, they have all the information available to them.
LANE:
A $10 billion Federal Government reinsurance pool was set up to help insurers at the cost of cyclones, but that only applies to damage incurred in the 48 hours after the weather bureau declares a cyclone over. These flats happen mostly after that time frame. Is that a flaw with the program's design?
JONES:
Well, this is not the only reinsurance that insurers have access to. It was designed by the former government, legislated by us. We said we made a commitment that we'd bring it forward if we won the election. We've also agreed to put in place a review of that to ensure it's operating as intended. I want to stress that it'll have zero impact on people's eligibility for claims. If they were eligible for a claim last week, they're eligible for a claim this week. The reinsurance pool is an insurance arrangement between the government and the insurers to help reduce some of the costs that they pay for their insurance. It was never intended to offset all of the reinsurance costs. They still access global reinsurance markets for additional capital. We'll look at it, Sabra. We've committed to look at it to ensure that it's operating as intended. But I do want to call out there's been a little bit of mischief going around, not by the majority of insurers, by some of them trying to muddy the waters and leave the impression that the reinsurance bill is going to impact people's eligibility for claims. That is simply not true. Insurers should just get on with the job of dealing with their customers in accordance with their policies.
LANE:
Stephen Jones, thanks for joining AM.
JONES:
Good to be with you.