In late February 2022, severe weather caused widespread flooding across South-East Queensland and New South Wales.
The Insurance Council of Australia (ICA) declared the event a catastrophe and the floods went on to take up the dubious mantle as Australia’s costliest natural disaster, with more than 240,000 claims lodged with a value of $5.76 billion.
Just over a year on from the disaster, households, businesses and communities are still recovering.
It’s a long process and some people have yet to have their insurance claims settled.
The ICA notes that just over 80 per cent of claims have been closed out.
At EBM RentCover 89 per cent of claims for this event have been settled.
That almost 20 per cent of insurance claims that are yet to be settled is telling in terms of the effect that the disaster has had on the insurance industry, and hints at the ongoing ramifications for landlords and agents.
Impact on insurance
At a time when many industries, including insurance, were still reeling from the commercial impacts of COVID-19, the spate of natural disasters across Australia added further pressure to already stretched resources.
For insurers, getting loss adjusters on-site to assess damage after the February floods was difficult, and then getting trades on-site to provide quotes and repair the damage was even more challenging.
They were part of a combination of factors which caused a backlog and delays in processing and settling the huge volume of claims lodged.
The result has been extended wait times for assessments and repairs, which, in turn, can mean higher claims costs (in insurance-speak it’s called ‘claims inflation’).
Speaking of increased claims costs… If you’re arranging or renewing landlord insurance for your clients, it would be prudent to get the policyholder to make sure the sums insured reflect current rebuild and replacement costs.
The restricted supply of materials and labour has seen prices for goods and services skyrocket.
According to figures from the Housing Industry Association, the cost of some materials, like steel products, rose more than 40 per cent in 2022.
Add in inflation (the annual CPI was 7.8 per cent) and increased construction costs (11.9 per cent over the 2022 calendar year, according to the Cordell Construction Cost Index), and sums insured nominated in property policies can quickly become out-of-date and put policyholders at risk of being underinsured.
Another factor to consider post-floods, when it comes to insurance, is that of new building requirements.
In disaster-prone areas (not just floods, but bushfires and cyclones too), construction standards are often lifted to consider the need for mitigation measures to be implemented.
These statutory requirements can increase rebuilding costs substantially, making it important to include the cost of such measures in the building sum insured figure nominated in the policy.
Sadly, it’s in times of disaster that landlords often find they are underinsured.
As their agent, you can help reduce the risk of underinsurance by reminding the policyholder to review their sums insured.
It’s also vitally important that landlords with property in flood-prone areas check that their insurance policy actually covers flood – it’s not an automatic inclusion (in fact, it’s frequently an exclusion).
Some insurers may not offer flood cover at all, only offer a small limit or offer cover as an add-on, and often a very expensive extra.
At EBM RentCover, we automatically include flood cover in all policies (up to certain limits or the sum insured), regardless of location, ensuring that property owners in flood-prone areas have the protection they need.
When it comes to premiums, the reality is that the increased costs associated with insured losses invariably means that insurance prices will rise.
In recent years, the insurance industry has been hit hard by costly natural disasters which have driven up the cost of providing cover.
Those extra costs are usually passed on to policyholders in the form of higher premiums.
Paying more is not something that anyone likes, but the alternative (not being insured) is a risk very few can afford.
Although the disaster season (November-April) is coming to an end, winter conditions are moving in on southern Australia, bringing storms, wind, hail, rain and potential flooding.
You can help your landlords prepare their rental by arranging weather-proofing including:
- Having the roof checked for leaks, loose sheets or cracked tiles.
- Pruning overhanging trees and branches so they can’t fall on the home or power lines.
- Repairing damaged windows and doors.
- Checking gutters, drains and downpipes are free-flowing and in good repair.
- Making sure rainwater easily drains away from all sides of the property.
- Inspecting walkways, stairs and driveways for damage, slip hazards or water pooling issues.
- Making sure any exterior structures that may be subject to storm damage are sound, such as patios and pergolas, outdoor steps and handrails, sheds, fences, and decks.
- Supplying sandbags and tarps at the property.
How to respond in times of disaster
Proactive weather-proofing may go a long way in helping to reduce the risk of damage, but if the property is damaged due to severe weather, you can help your landlords by following this six-step plan:
- notify the landlord insurance provider
- arrange emergency repairs
- gather the evidence of the loss and damage
- get quotes and causation reports
- keep the receipts for the repairs
- submit the claim
If the severe floods of February 2022 have taught us anything, it’s that the havoc wreaked by natural disasters can last long after the waters have resided.
The flow-on effects on those impacted and the industries dealing with the aftermath like insurance and construction, can continue to be felt months, or even years, later.
Every crisis or natural disaster has lessons to impart.
Acting now to help your landlords protect their assets – from weather-proofing buildings to making sure they’ve got their sums insured right, and of course, ensuring that their insurance covers the unique risks their properties face, like flooding – can be a significant comfort when Mother Nature next decides to strike.
- Our advice about insurance is provided for your general information and does not take into account your individual needs. You should read the Product Disclosure Statement and Policy Wording prior to making a decision; these can be obtained from EBM. Article supplied by EBM.