The Insurance Council Of Australia is often told that insurers should fund mitigation to protect communities. After all, the argument goes, they are the prime beneficiary of damage being prevented. Is this really the case?
Of course not. Insurers set premiums based on the residual risk of an event occurring. As a general rule, Low risk (post mitigation) = Lower premiums. Insurers reduce the level of premium income they collect, post-mitigation. The prime beneficiaries are the community members who suffer less damage and pay smaller premiums. Government also wins, by dramatically reducing its disaster recovery spend.
Insurers should not be responsible for mitigation. However, insurers must: continue to competitively reduce premiums to recognise mitigation when its done; and help to prioritise work, by showing where the worst exposures are and how the community benefits by fixing the root cause. Want to learn more about how insurers can help, see www.icadataglobe.com
Governments must reduce risk through focussed mitigation, planning and building standards. Premiums will respond, wherever exposures and vulnerabilities are reduced and, most importantly, where insurers are made aware of the changes.