The Insurance Council of Australia says the federal government should be pumping at least $200 million a year into flood mitigation infrastructure, and treating it as an important nation building exercise.
The comments by ICA chief executive Rob Whelan were made at a Senate estimates hearing into Australia’s general insurance industry held in Sydney on Wednesday, where he also advocated for stronger building codes and better planning to prevent inappropriate development.
He said the insurance industry was disappointed the government response to the Productivity Commission’s report on Natural Disaster Funding had not taken up a recommendation to increase mitigation funding to $200 million a year, matched by states and territories.
“Today, in the aftermath of Cyclone Debbie, the case for urgent investment in permanent, well-designed mitigation for disaster-prone communities cannot be clearer,” Mr Whelan said.
“Where mitigation does not exist or poor decisions were made about the design, floods have proved devastating. Insurers have to price the risk of these events, and where the risk is high so too are the premiums.”
Mr Whelan said premiums were “the canary in the coal mine” regarding the risk of living in a particular area.
“These signals should spur action in the form of mitigation and resilience measures, better town planning to prevent inappropriate development and improvements to building codes.”
We’re not focusing on prevention
He said 97 per cent of government disaster funding was spent after major events, which ignored “the overwhelming evidence of the massive economic benefit of funding prevention where $1 spent on prevention can save up to $10 on recovery”.
“The consequence of inaction is community devastation and hundreds of millions of dollars being spent by governments on disaster recovery, which has no impact on the underlying problems,” Mr Wheland said.
“Though the cost of Cyclone Debbie will take a long time to be tallied, insurers are paying out $2 million a day in emergency repairs and accommodation and expect insured losses will total more than $660 million. The cost to governments in disaster relief funding, loans and subsidies as well as replacement of major infrastructure could easily outstrip this amount.”
Mr Whelan pointed to Canada as an example of a government on the front foot in regards to resilience, which has allocated $2 billion in the 2017 budget to create a Disaster Mitigation and Adaptation Fund.