The Federal Government says it may subsidise insurance premiums for people living in flood-prone areas.
During the recent Queensland floods many people whose homes were flooded were either under-insured or not insured at all.
Assistant Treasurer Bill Shorten today announced a six-month review into natural disaster insurance, which he says will determine if private flood insurance was adequate and if there is a role for the Government to provide a subsidy.
He says the review will investigate the level of non-insurance and under-insurance for flood damage and what can be done to change that.
“We’ll be seeking answers from individuals and communities affected by floods and other natural disasters on how they will be able to recover as quickly as possible,” he said.
“We want Australians to be able to choose where they live in an informed way.”
The review will examine the ability of private insurers to offer “adequate and affordable” insurance to individuals, small businesses and governments for floods and other natural disasters.
He says it will also look at “whether there is a case for subsidising insurance premiums for individuals and small businesses in areas of highest risk”.
He said the inquiry would look into the Government providing disaster insurance or re-insurance to the private sector or the establishment of a natural disaster fund.
The review will be chaired by actuary and former insurance regulator John Trowbridge and assisted by an insurance claims lawyer and a life insurance executive.
Mr Trowbridge says it is separate from the examination of a single flood definition.
“The flood definition of itself is the beginning of a solution; it’s not a complete solution,” he said.
“It will give us the opportunity to have a common understanding across the community of what’s covered and what isn’t.
“But it doesn’t solve the problem about who will pay for it, how it will be funded and they’re the sort of questions the panel has to look at.”
The Insurance Council of Australia welcomed the inquiry but said flood mitigation and mapping should be part of the probe.
Chief executive Rob Whelan said proper flood mapping would better define risk and allow the industry to offer a range of insurance policies.
“Other measures of importance include improved building standards, better land-use planning, as well as the introduction of preventative infrastructure projects such as levees, barrages, flood gates and improved drainage.”
The commission of review is due to report to state and federal governments by the end of the year.
But Opposition spokesman Mathias Cormann is warning against the idea of subsidies, saying it would distort the market.
“[It would] encourage people to take higher risks than what they otherwise would,” he said.
Source : ABC News
