‘Making money’: insurers scolded over flood payouts
Dominic Giannini |
Insurers have been grilled about delayed or unpaid claims from people who lost everything in devastating floods.
Industry leaders defended the payout processes at a federal parliamentary hearing on Monday, warning significant changes to the systems could force premiums up or send companies broke.
“Home insurance as a product in this country is under extreme pressure,” Insurance Council chief executive Andrew Hall said.
Mr Hall warned it was becoming harder to insure people in flood plains.
“It’s very expensive – 220,000 homes sit in a one-in-five flood area,” he said, referring to the probability one would happen in those years.
Independent MP Andrew Gee scolded the council in a fiery exchange, saying the industry made a net after tax profit of $4.6 billion, up more than 400 per cent, last year.
“The industry is not on its knees … you’re making a lot of money,” he said.
In response, Mr Hall said profits were highly volatile and subject to returns on investment.
“It’s been the worst performance in two decades now for Australian insurers,” Mr Hall said.
If insurers were able to turn a profit, it meant more competition could come back into the industry, which would lead to “a lot more downward pressure on premiums”, he said.
“But at the moment, we’re still struggling trying to get that equilibrium between the cost of reinsurance, the cost of running the businesses and what’s needed,” he said.
Mr Gee also grilled the Insurance Council for not reforming their practices, including changing coverage from the baseline standard by sending households a complicated product disclosure statement they don’t understand.
“We’ve had big events before, your organisation has been around since 1975. Why hasn’t all of this been done?” he said.
Local planning laws were also allowing houses to continue building on flood plains that were making it harder to reinsure damaged homes, Suncorp Group chief executive Steve Johnston said.
“I’ve been in Auchenflower and Milton (in Brisbane) where I’ve seen homes four times for floodwater in under the house, and then people just go back and they’re rebuilding under the house again,” he said.
While everyone believed their home was well maintained and up to code, it’s often the case this wasn’t true when insurers started the claims process, he said.
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