The federal government has asked a specialist climate agency to fill an information black hole so it better understands what insurers cover for those who live in areas prone to natural disasters.
Assistant treasurer Stephen Jones told the recent International Congress of Actuaries in Sydney that the government and the insurance sector are working together to fill data gaps to get a better picture of what the insurance sector is doing when disasters hit.
Part of this effort is a request to the Australian Climate Service to develop and maintain a database on insurance affordability, underinsurance and non-insurance.
The Australian Climate Service is a part of the Bureau of Meteorology but uses expertise from the bureau as well as the Australian Bureau of Statistics, CSIRO and Geoscience Australia.
Jones told the audience of actuaries that policy-making is harder when a government does not have the right information to inform its thinking.
“Data on insurance affordability, and availability, and coverage is often limited, and that means that the scope and scale of issues can be hard to grasp, and policy interventions are harder to target,” Jones said.
A key purpose of getting the data, Jones observed, was to enable government to share what works with the community as well as ensure that households know what they can do to reduce risks and costs.
“For 12 months, our government has been saying that it makes little sense to mask the risk of climate change through subsidies for insurance if it encourages building the wrong buildings in the wrong places,” Jones said.
“This is just orthodox economics. But the same orthodoxy has to be applied by insurers when they are pricing premiums for communities and households based on the risk that remains when steps are taken to mitigate risk.”
Jones said people in communities taking actions to minimise risks ought to be rewarded for doing so.
“If [people taking risk-mitigation steps] are lumped with the same premium as people who are not taking those steps, then that’s unfair,” Jones said.
“Not only is it unfair, but it’s also bad business and bad economics. It sends all the wrong signals.”
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