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We are here with Sean Bemrose from Tony Bemrose Insurance Brokers. Now Sean I have a question
for you regarding the flood studies. How seriously are insurance companies looking into the results
where people may be impacted and how will this affect the insurance premiums?
I think it is going to be very similar to what they are doing in Brisbane at the moment,
where the studies are coming through. Not only showing where water has been but where
are they predicting water to be, subject to different levels, different flood event levels
either 7 metres, 9 metres, 10 metres. I think that's impacting now the underwriting decision
going forward. I suspect that if it can be shown that a strong flood mitigation strategy
is in place for a certain town. That the community will have an argument with the insurers to
reduce the premiums, but I'd also suspect that they are not going to do it in a hurry.
I think there is a significant history there of losses previously and I suspect they are
going to continue to try recoup some of those losses or at least get some sort of level
of surety as to what will happen if another large rain event occurs. I think pragmatically
I think some of them may wait and see what occurs after a bigger rain event say a devy
or a levy system installed, to see how actually it performs.
Now Sean, we see people lifting their living areas, according to the flood studies and
the previous year’s flood heights, can any of these precautions help in negotiating with
insurance companies and in flood insurance? I think, yes I think there is an absolute
possibility that should happen - I think that would make commercial sense, for the insurance
companies to have that conversation again. But the only fear basically I think it is
going to take that sort of 12 months or maybe 18 months cycle, to get them to come back
to the table. Hopefully we will see a little more insurance capacity coming into the region,
where people would want to see a reasonable period of stability and no large weather events.
If you see the competition come back in then you will see premiums come back. But where
we are stuck at the moment less than a handful of insurers doing regional and North Queensland
then we are getting dictated to by the market, but again I think as a Broker I advocate using
a Broker at least have the conversation with CG or QBE or whoever you are using out there.
What are the chances of the businesses that have been flooded for the past three years,
getting any flood insurance? Flood Insurance is going to be a difficult
challenge because again, and you have to take the view that the insurance companies are
businesses right, they are all built on the premises that every underwriter and persons
in those companies has the responsibility to operate a portfolio business that will
ultimately make money, that is just the way they operate. If you have underwriters in
those companies that take decisions that end up costing insurance companies a large amount
of money when those decisions probably should not of been taken, those guys the reality
is they risk their jobs, just as everyone else does if they are doing the wrong thing.
I think as a community you need to be as active as possible in fact that their property may
flood you need to do whatever risk management measurement you can to put in a policy that
if, if you know water is going to come and the likelihood that it could occur that you
are well prepared for it, you understand what is going to get damaged and what’s not going
to get damaged and you put yourself in a position to put the business back together as soon
as you can. And again I think the only other option there is in that sort of situation
is to lobby government to see whether or not, as I said I am an advocate and I think in
some areas a flood levy is an absolutely a viable alternative to assist in insurance.
We do it with what you call the terrorism levy and have done since 2001, where every
commercial insurance policy in the CBDs and Metro areas and I think stemming out to regional
Queensland a portion of your commercial insurance premium is being paid into a what they call
a terrorism fund - which is managed by the federal government and there is an extraordinary
large amount of money sitting in it. I am not sure where the government goes but there
is a lobby to the government to say where there is no reason that I think such a similar
system could run and be linked with insurance and providers the insurers some sort of reinsurance
support, so if you buy insurance, maybe you get access to 50 or 100 grand worth of flood
cover, or enough to keep the business going but I think that is the only other option
that needs to be put because it becomes a community wide issue. I think the insurance
industry in some occasions has done itself no favors in the way that they have priced
their products and I think we have had a period in the early 2000’s even the mid 2000’s
where we have had, maybe significantly price driven competition going along, along with
the combined higher investment return for insurers, so you're seeing premiums that charge
that might not of generally reflected the risk they are incurring and it goes up not
just for insurance companies but through to the reinsurance companies that effectively
insurance companies that buy their own insurance. Insurance companies make money two ways, one
they make it out of premiums and they also make it out of investment markets. So when
investment markets are strong, generally you see premiums come down. Investment markets
faultier, premiums come up. As I understand the last six or so years in Australia and
Queensland we have been hit with some of the four of the largest catastrophes in the Asian
pacific region, that affectively scarred away the reinsurances capacity and all that has
flowed through to what we are seeing now which is the difficulty in getting flood for a start,
and extreme transfer variations, that in hindsight I think it would be much easier in the times
when times were good, profitability was up, not just the rural section but also the businesses
and small to medium businesses which everyone probably could of carried a slightly hirer
insurance premium, and maybe as I said the market does not work that way, but if we charged
a bit more consistently we might not of seen the problem we have got now which is as I
said of direct result of market competition. But also the fact that Australia as a whole
is a very small insurance market. And when we go and buy insurance globally, the global
insurance look at us as, particularly in Queensland and after the floods and cyclones as not a
particularly a good risk, there cutting out whole sways of area. It is something that
I would hope in the next couple of years maybe we get to the period of stabilisation where
we don’t face the same issue again and I think with the accommodation of sort of flood
levies and other risk management issues going on, hopefully we won’t face it again. But
I think we are in for a another year or a couple of years now of difficult times.
Thank You Sean, for more information visit emergencyvolunteering.com.au/brte
Elana Siu Volunteering Queensland TV.