bcc subject New submission ~itle:MS First Name: Annabelle surname: Butler suburb: Me1 bourne postcode: 3004 state: VIC Telephone: Main Topics: other: Non/under insurance, affordability, behavioural economics of under/non insurance- Towns 1: Towns 2: Towns 3: Acknowl edsements: * I understand that Ican be contacted by the Royal Commission in relation to my submission. Iwould like to receive future updates about the activities of the Royal Commission. SUBMISSION TO THE VICTORIAN BUSHFIRES ROYAL COMMISSION Contents Introduction ............................................................................................................................................ 3 Executive Summary .................................................................................................................................4 Section 1: Event Management and Response Capability ....................................................................... 6 The Insurance Experience ................................................................................................................... 6 Key Lessons Learnt from Black Saturday ........................................................................................ 6 Practical Issues ................................................................................................................................8 Recommendations ..........................................................................................................................9 The Banking Experience .................................................................................................................... 10 Section 2 .Affordability of lnsurance/Non lnsurance/Under Insurance ........................................ 12 Current Research .Affordability ....................................................................................................... 12 Industry Response -Suncorp Group ........................................14 Affordability .Product Innovation ........................................14 Under Insurance ...............................14 Industry Response .Suncorp Group ...................................15 Section 3: Behavioural Economics of Under and Non lnsurance in Bushfire Affected Areas . Observations from Price Demand Analysis of Insurance Uptake in Risk Prone Areas ......................... 18 Level of under insurance and pricing implications for total loss and replacement policies ............. 18 The Analysis ...................................................................................................................................... 19 The Cost of Insurance .................................................................................................................... 20 Channel Selection.......................................................................................................................... 21 Higher Excess ................................................................................................................................ 21 Pay by the Month .......................................................................................................................... 22 Selective Risk Cover (Building vs . Contents) ................................................................................. 22 Conclusions ....................................................................................................................................... 23 Recommendation.............................................................................................................................. 23 SUBMISSION TO THE VICTORIAN BUSHFIRES ROYALCOMMISSION Introduction The following submission from Suncorp represents a group view in response to the Victorian Bushfires Royal Commission's call for information in regards to the events of Black Saturday - 2009. The Suncorp Group consists of various types of financial services providers including: General lnsurance (AAMI, Apia, GIO, Shannons, Just Car lnsurance, Suncorp Direct, Vero Travel and two internet insurers, Bingle and InsureMyRide). Commercial lnsurance - GIO, Vero and VeroProfin Banking - Suncorp Bank Suncorp Wealth Management and Financial Planning, Suncorp Investment Management Limited (SIML), Asteron (Australia and New Zealand),Tyndall (Australia and New Zealand), Standard Pacific, Guardian Financial Planning, Guardian Trust (New Zealand) and Cameron Walshe. The following paper gives an overview of Suncorp's experiences during the events of Black Saturday and the following weeks. It looks at experiences from both an anecdotal level, with feedback being given by staff who were on site lodging claims and later, assessing homes/businesses, and from an analytical perspective in regards to numbers, costs and ongoing consumer behaviour. Additionally, it looks at the current method of funding for the Victorian Country Fire Authority (CFA) and the Melbourne Fire Brigade (MFB) and makes some observations regarding ongoing viability and other methods of revenue raising to support thesevital organisations. Suncorp, along with IAG (RACVIIMA, CGU), have the majority of market share in domestic insurance in Victoria. The Suncorp brands received 26% of claims made in the Black Saturday bushfires. All questions or comments in the first instance should be directed to: Rob Whelan Executive Manager, Policy and Projects - Personal Insurances Annabelle Butler SUBMISSION TO THE VICTORIAN BUSHFIRES ROYALCOMMISSION Executive Summary The Black Saturday tragedy saw the deployment of massive public sector and private sector resources to meet the challenges of recovery and reconstruction. The insurance industry and in particular the Suncorp Personal Lines lnsurance Group, which is one of the largest single insurers for the affected areas, committed substantial physical and financial resources to meet the demands of customers and government instrumentalities in the aftermath of the fires. This submission seeks to inform the Royal Commission of the efforts made at both the physical/logistical level and the financial level, pointing out those factors that both contributed to the response and also those that acted to hinder a more effective response. The submission also provides suggestions for both policy and procedural changes that will assist in ensuring a more effective response to future events. Suncorp has conducted a thorough review of the impacts of this event on our business and the effectiveness of the actions and activities that constituted our response. This review has highlighted a number of relevant issues that can be factored into how the Suncorp Group should restructure its disaster management capabilities for future large scale events. Additionally it has highlighted issues in relation to accurately pricing risk compared to the estimated costs of such an event. Importantly these issues have relevance for the realm of public policy, particularly as it pertains to the issues of under and non insurance and the co-ordination of recovery activities and dissemination of critical information during the initial response phase. The submission is in three parts: 1. Lessons learned for event management immediately post the disaster 2. Under and Non lnsurance 3. Insights on the behavioural economics of insurance pricing, based on analysis of insurance price and demand relationships in the affected bushfire areas. In each section, proposed policy recommendations are provided to assist the Royal Commission in its deliberations and final recommendations. In summary, these recommendations are as follows. 1. Victorian Government to set up a permanent disaster management taskforce, made up of all key stakeholders (ministries, insurers, emergency services, industry bodies etc.). This taskforce comes into being when a major event occurs to allow co-ordination of relief efforts by the different parties. Additionally this taskforce can be the major conduit of communication regarding recovery efforts, management of sites, OH&S issues, access issues etc. SUBMISSION TO THE VICTORIAN BUSHFIRES ROYAL COMMISSION Standard warning signage for affected sites in a disaster area needs to be agreed and published. Better understanding by all stakeholders of OH&S issues resulting from extreme temperatures e.g. disintegration of asbestos, burning out of tree roots. lnsurers to work closely with government to make use of bulk public clean-ups and explore compliant fast track ways of dealing with fibro asbestos in the most economical way. Fast-track building applicationfapprovals with local government. Acknowledgement and understanding that insurers play a key role in, and are well experienced at helping to rebuild communities after an event. lnsurers expertise is in claims management. Therefore allowing insurers a greater role initially in the event managementfco-ordination would help to reduce the impacts of an event on the local community over the long term. Funding of the CFAfMFB- the current system of levies is inequitable due to the rate of non insurance. The following paper recommends that levies should be collected using the local council rates, rather than on insurance policies (which impacts affordability of insurance and in turn contributes to the number of consumers deciding not to purchase insurance or to under insure). Improved funding of the CFA - to enable them to have paid permanent fire fighters in regional areas and access to more equipment if needed. SUBMISSIONTO THEVICTORIAN BUSHFIRES ROYAL COMMISSION Section 1: Event Management