Federal Government to develop standard insurance definitions and review standard cover regime

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An Albanese Government initiative to help reduce the cost of insurance in communities at risk of natural disasters, will enhance mitigation measures and drive better outcomes for insurance holders.

The Hazard Insurance Partnership and Strategic Insurance Project aims to address rising insurance premiums and help communities be better prepared for disasters.

Federal Minister for Emergency Management Murray Watt said the initiative will deliver a package of reforms to help improve insurance affordability over time.

“As we have seen over the past month, the risk of natural disasters is increasing in many areas of Australia,” Minister Watt said.

“That is driving up the cost of insurance, leading people to underinsure and in some cases, not even take out insurance.

“Poor insurance coverage makes it harder for households and communities to fully recover if hit by a natural disaster.

“This important initiative will help households reduce their exposure to natural hazards in order to reduce insurance premiums.

“We want to identify the most pressing insurance issues in high risk areas and test the best policy solutions to reduce insurance costs.

“All of these measures support our flagship Disaster Ready Fund – a commitment of up to $200 million per year to fund investments that build long term resilience.”

Assistant Treasurer and Minister for Financial Services Stephen Jones said this initiative will support better outcomes for businesses and individuals.

“It is vital that we make coverage for natural hazards easier to understand when taking out an insurance policy,” Minister Jones said.

“These reforms will help ensure that Australians can obtain adequate insurance for their homes and businesses.

“The package also includes a forum for cooperation between the Australian Government and the insurance sector which will address issues driven by natural hazards.”

The Australian Climate Service (ACS) will also establish an enduring dataset on insurance affordability, underinsurance, and non-insurance issues.

“This will help inform policy design and measure progress in addressing these challenges,” Minister Jones said.

“A national mitigation measure knowledge base will also provide policy holders with mitigation options to reduce the risks their properties face.

“We will also unlock private sector in investment in community level risk reduction through public-private sector partnerships that identify and fund risk reduction investments to put downward pressure on insurance premiums.”

The Government will also develop standard definitions for certain natural hazards in insurance contracts and to review the standard cover regime to improve consumer understanding of insurance products.

This work will foster competition and allow consumers to make more informed decisions about their cover, reducing the risk of unintentional underinsurance.

Fast facts:

  • Rising natural hazard risk leads to rising insurance costs.
  • ?This leads to people buying less insurance or no insurance and finding themselves vulnerable when disaster strikes.
  • This increases the harm they suffer, and the costs governments pay.
  • These issues are only expected to get worse over time as the impacts of climate change become more apparent.
  • This proposal provides a package that will work to:
    • identify of the most pressing insurance issues in areas prone to natural disasters;
    • target and test the best policy solutions to reduce risk and insurance costs; and
    • support better consumer outcomes via more affordable insurance and a better understanding of insurance products.