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Business fears post-flood insurance hike

Adam Zuchetti
Adam Zuchetti
15 February 2019 4 minute readShare
Townsville aerial shot

Already paying $3,000 a year for insurance, a business owner impacted by floods in Townsville has expressed concerns that insurance premiums may be about to skyrocket further.

Townsville resident Jenny Waterfall, who was one of several business owners to open up to My Business about the impact of the floods, suggested that victims of the disaster may be in for a new “whack” once damages are fully assessed by insurers.

“We’re going to have a whack because… of house insurance up here, how much it costs. It’s absolutely huge,” said Ms Waterfall, who operates her bookkeeping business partially from home, and partially from client premises.

“For a year, for us, ours is like $3,000 and that’s with an excess of $5,000, because the only way we could afford the house insurance was to have that big excess. Otherwise, if you drop it to two [thousand excess], you’re paying like six grand a year.

“A normal person can’t afford that; it’s horrendous. And I’m sure I’m not the only one [in this situation].”

Separate from the property, Ms Waterfall also lost vehicles and a caravan to the floods.

The Insurance Council of Australia briefed Queensland Deputy Premier Jackie Trad on Friday about the disaster, telling her that there have been 15,571 claims lodged relating to the disaster, worth $606 million.

It said that around 10 per cent of those claims are from businesses.

Priority is being given to 457 residential properties that have been deemed unliveable, it said.

‘Too early’ to determine impact, but higher premiums not guaranteed: Insurers

Major insurers contacted by My Business said that it is too early to speculate on premiums, at least in part, because the full damage bill is being assessed. But in a glimmer of hope for residents and business owners alike, more than one said that a rise in premiums is not necessarily a foregone conclusion.

“The damage in Townsville is devastating,” a spokesperson for IAG, which also owns NRMA, said.

“Our assessors and builders are currently on the ground in Townsville inspecting and repairing our customers’ properties. Our claims team is supporting our customers at the recovery centre at Townsville Stadium by helping them lodge claims and organising emergency accommodation.

“Once a claim is lodged, we can help our customers through the assessment and repair process.

“So far, we’ve received 1,997 claims.

The spokesperson added: “It’s too early to assess how the flooding in Townsville will impact premiums as we’re still working through understanding the impacts of the event, and focused on helping our customers through their recovery.”

Suncorp, owner of brands including AAMI and GIO, agreed that it is too early to predict the impact for insurance policyholders, but suggested that a single flood event may not be enough to impact premiums.

“For the recent floods, we’ve received thousands of claims, but it is still too early to evaluate the full impact and people are still lodging claims,” its spokesperson told My Business.

“Insurance premiums are priced to a number of risk-based factors. We have processed millions of claims and have sophisticated risk modelling — one single event will not necessarily affect insurance premiums. We will review our risk rates, particularly for flood, in Townsville to see how well our current rates reflect the true underlying risk and, if required, we may make adjustments to better reflect the risk of individual insured properties.

Allianz concurred that the disaster will not automatically generate a hike to premiums.

Insurers plan for such events by establishing annual natural catastrophe reserves and they also have in place natural catastrophe reinsurance arrangements to provide financial protection against abnormally large claims events. As a result, it does not necessarily follow that a natural catastrophe event will have any across-the-board impact on insurance premiums,” a spokesperson said.

Large flood events inform existing state and local government flood mapping and the flood risk data and models used by insurers and reinsurers to assess and price flood risk. Insurers constantly update and refine flood risk pricing based on new information, which over time can flow through to flood risk premiums at the individual property level.

It is not possible at this early stage to speculate what, if any, impact the North Queensland monsoon and subsequent flooding in Townsville and elsewhere might have on insurance premiums.

Allianz added that it had received around 500 claims, to the value of $6.6 million, as of Wednesday (13 February).

Meanwhile, the chief operating officer of claims at Youi, Jason Storey, said in a statement that it had to date received more than 600 claims, worth more than $5 million, and those figures are still growing.

He added that it is too early to discuss potential impacts on premiums.

This will ultimately be determined by the overall cost of the event subject to a reinsurance recovery, he said.

Disaster assistance ‘a God-send’

The goods news, though, has been the level of assistance — from government as well as other businesses, near and far — being offered to flood victims.

Ms Waterfall praised the government for speedy delivery of disaster assistance grants, with the funds hitting her account within 48 hours.

“It’s really good like with the government, they’ve already issued out assistance in grants that we can apply for. I applied for one immediately, because we didn’t have much money in the bank because we’ve actually just had to pay quite a few big bills,” she said.

“The government’s put it in my bank account in two days, which is just a God-send, because now at least we’ve got some money.”

Fellow Townsville business owner Raymond McConville told My Business that other companies, including CRM software providers, had also reached out to offer assistance by waiving their subscription fees for six months.

“At least half of them have contacted me off their own bat and said they would not charge us for six months,” he said.

“That on its own has been a huge thing.”

The ATO has also said that affected taxpayers and their tax agents will be granted extensions on lodgement and payment deadlines.

Business fears post-flood insurance hike
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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