Speech - Insurance Council of Australia

Thank you, Ellen Janning, for that introduction.

And thank you Andrew Hall, Executive Director and CEO, Steve and the Insurance Council of Australia for hosting us today.

I want to acknowledge my Parliamentary colleague, Dan Mulino, and the work of his inquiry into the role of insurance in response to natural disasters.

We meet on the lands of the Jagera and the Turrbal people. I pay my respects to their elders, and acknowledge their continuing custodianship of country.

I’m very pleased to have the chance to speak with you today. It’s a big gathering of people from a sector that I know well. And it’s also a chance to speak frankly about some of the challenges our communities are facing.

I know it’s a conversation you’re up for. I will never forget your decision - as a sector – to speak up about the practical risks climate change would present to Australian households and to the Australian economy.

You took on this task at a time when it wasn’t popular to do so.

But your advocacy helped to change the debate; you were part of making climate risk a mainstream business issue. And after a long pause, it’s now core business for our government too.

And not before time. Our government is tackling a host of climate related challenges that for too long were swept under the carpet. And I’d like to use today to talk through some of the projects where we have a common interest.

An inflection point?

But first, I want to start by describing a year in Australia to you.

At the beginning of the year, we see the east coast battered by torrential rain.

The Bureau of Meteorology reports 6,700 homes in Brisbane inundated with water, and thousands more in the surrounding region.

16 people lose their lives.

As the year goes on, we see bushfires raging across south east Australia.

It is estimated to be the worst bushfire season Australia has faced in 30 years.

15% of Australia’s land mass sustains extensive fire damage.

3 people lose their lives.

And then, as the year is coming to an end, we see a cyclone devastate northern Australia.

This cyclone rips through Darwin, leaving an unparalleled trail of destruction. The majority of Darwin is forced to evacuate. When they return, it is to a destroyed city.

71 people lose their lives, and Australia is forced to grapple with what comes next.

I am, of course, talking about the year 1974. It’s a year in which I turn 1, and where Australia faced a series of natural disasters – unprecedented, at the time, in scale and severity, culminating in Cyclone Tracy.

These events changed the country and the Whitlam Government’s thinking around disasters.

In that year, the Whitlam Government created the Natural Disasters Organisation, fulfilling a campaign commitment made in 1972.

For the first time, we acknowledged that some disasters were just too big for the states and territories to go it alone.

And in the aftermath of Tracey – Darwin was rebuilt to a different standard.

Not just to replace like for like, but to create a stronger, more resilient city. The majority of buildings in Darwin are now built to withstand a Category 5 cyclone.

Our choice

Fifty years on, we find ourselves at a similar inflection point.

Over the last five years, we have witnessed multiple, compounding natural disasters hit Australia.

Black Summer led into three La Nina seasons led into multiple cyclones.

The cost to communities, to Governments and to industry from these events has been astronomical and expected to grow.

This is in line with what the insurance industry has been observing for decades.

Data released by you [the ICA] this year shows that the economic impact of extreme weather over the last three decades has more than tripled. [1]

At a point, the cost could become unsustainable

For governments to continue to rebuild

For insurers to be able to provide coverage

For homeowners to be able to afford it.

We have a shared interest in ensuring this doesn’t happen.

Building resilience

Of course one of the best ways we can do this is by investing in resilience.

There’s an old data point that often gets trotted out when we talk about disaster funding – that we invest 97% on disaster recovery and only 3% on resilience.

Ten years ago that was true. It is not true anymore under our Government.

It’s one of the things I’m most proud of.

In 2011 our annual commitment to resilience funding was $50 million.

Now, our total program is $4 billion.

And for good reason. The Global Centre on Adaptation found that resilient infrastructure could deliver up to $12 for every dollar invested.[2]

I want to acknowledge your advocacy on this when we were in Opposition.

You sent us a clear message. For too many years we had not seen meaningful, sustained investment put towards building resilience.

So when Labor came to Government in 2022, we established the Disaster Ready Fund. We’re providing up to $1 billion of Commonwealth funding for disaster resilience and mitigation projects across the country. And we’re learning a lot as we do so.

Our work

Last month, I announced the 164 successful projects from round two of the fund.

We'll see improvements to cyclone shelters from Nhulunbuy to Kununurra.

We’ll see coastal works from places like Noosa to Fremantle.

We'll see investments in flood levees in central New South Wales.

Through the Resilient Homes programs, we are working to get homes off flood plains in some of the highest risk areas in South East Queensland and the Northern Rivers of NSW.

I am pleased to say that we recently reached a milestone here in Queensland, with over 500 families relocated.

And as we work together – we get more and more information about how to best target these investments – more about that later!

Future infrastructure

It is one thing to remedy the decisions of the past.

But we have the power now to make sure we are making smarter, safer decisions on where and how we build in the future.

Building Ministers recently agreed to add climate resilience as an objective of the Australian Building Codes Board.

This will lead to future standards that ensure new buildings can better withstand extreme weather.

The Planning Ministers are also working to develop national principles for considering disaster and climate risk as part of land use planning.

And our government is preparing the first National Climate Risk Assessment, to inform whole of government adaptation planning.

In sum, we are working across government to address historical risk while planning for the future.

Risk and insurance

I’m conscious that this is a crowd with more than a passing familiarity with the concept of risk.

We can minimise risk, but we can’t eliminate it.

This much has become clear as we have all watched devastating scenes unfold in the United States.

In rapid succession, Cyclone Helene and Cyclone Milton hammered communities, destroying homes and costing lives.

Closer to home, last week, the Bureau of Meteorology released their seasonal cyclone outlook.

Expected higher than average temperatures are likely to lead to an active storm and cyclone season.

Since coming into this new role, I have been able to get up to Far North Queensland twice.

I’ve met with people in Cairns, on the Northern Beaches and up in Port Douglas who are bracing for what this wet season will bring.

Tropical Cyclone Jasper left a deep scar, and many residents remain understandably concerned for their safety and the safety of their community.

But they’re also concerned about the growing cost of insuring their homes against future risk.

In Far North Queensland they feel the strain acutely, but they’re not the only ones.

A report released by the Actuaries Institute recently found that nearly 1.6 million Australian households are now facing home insurance affordability stress. [3]

This is driven both by our changing climate, the increasing value of our built assets and supply and labour constraints. The truth is we have more to lose than ever before – as a community and at an individual level.

And insurance is key to protecting these assets.

Australia has been well served, historically, by a model where insurance is broadly available to assist asset owners to manage their own risks, allowing risk to be managed effectively and efficiently in the economy.

Our government recognises the importance of an affordable insurance sector structured to support the safety and wellbeing of communities. But increasingly this model is under strain.

There are levers we can pull to drive down risk in communities and consequently put downward pressure on insurance premiums.

However it’s a textbook case of a policy problem that demands collaboration:

You have information we need on how insurance and the finance sector more broadly interacts with the growing risk facing your customers.

We have information on public policy design and community expectations.

It speaks to the significance of the Hazards Insurance Partnership – a genuinely innovative collaboration between the sector and the government.

Shared work

Like any good partnership, it depends on trust and honesty.

You have trusted the Federal Government with your insights and - perhaps more crucially - your data.

This information has been critical in helping us kickstart a number of projects designed to better protect communities.

Like the work being done to identify high priority flood catchments, which we can use to better target mitigation works to areas of highest risk.

Or the development of an all hazards toolkit of mitigation works homeowners can undertake to reduce their risk.

In turn, we are trusting the insurance sector to reflect meaningful risk reduction in your premium pricing.

Our significant investments in disaster resilience and mitigation can serve a dual purpose – to better protect communities and bring down their insurance premiums.

And I would like to commend the insurance sector on instances where we have seen this happen.

Take the Household Resilience Program – we know that Queenslanders who accessed it to make resilience upgrades to their homes are, on average, seeing insurance premium reductions of 13%.

We have also seen insurers sign on to provide discounts for households who use the Bushfire Resilience Rating assessment and make their homes more resilient to bushfires.

These efforts are a good start. They are great examples of how Government and industry can work together to address the long term cost of living pressures on Australians.

There’s more to do. In the coming years we have the chance think seriously about when, where and how we invest in resilience and mitigation.

We are reaching a critical juncture. And if we make good decisions, we can protect communities for decades to come.

Just like Gough Whitlam made the decision to rebuild Darwin to a better standard fifty years ago.

I would ask that you remain a partner to the Commonwealth as we continue this work.

Keep giving us your ideas and your feedback.

Thank you for having me and I look forward to your questions.