More politicians back expanding Australia’s cyclone reinsurance scheme to cover fires and floods

State and federal MPs from both sides of politics representing flood-affected communities have called for the planned commonwealth cyclone reinsurance scheme to be expanded to cover other natural disasters.

Many people impacted by Australia’s current east coast flooding couldn’t afford insurance cover even before the current crisis struck.

Insurance experts told a federal Senate committee on Tuesday there was a “market failure”, while the industry’s peak body said governments should spend more on disaster resilience.

Liberal MP Warren Entsch said last week the federal government should expand its reinsurance pool for northern Australia to other parts of the country. The current model, backed by a $10bn government guarantee, aims to protect more than 500,000 properties in the path of cyclones and cyclone-related flooding in the country’s north.

Janelle Saffin, the Labor MP for the state seat of Lismore in New South Wales, said expanding the reinsurance pool would be “a bit late – but better late than never”. She said many people in her electorate were unable to afford insurance and she would support any proposal that would reduce premiums.

“The Insurance Council is here, we’re meeting the CEO here today. I’ve read all that [about expanding the scheme], those are the conversations we’re having,” Saffin told Guardian Australia.

“There’s an idea of rebuilding better. Disaster rebuild assistance says you rebuild to the same standards. But we’re not going to do that – we’ve got to rebuild better.”

Saffin has called for a joint state-federal flood reconstruction commission to bring together government agencies. She called on the commonwealth to provide grants for private buildings like doctor’s surgeries which had been devastated by the disaster, as well as a jobkeeper-style program to cover the wages of workers in flood-affected businesses.

As of Tuesday, the federal government said it had already paid $282m in flood disaster payments to 242,000 people.

The federal Coalition MP Kevin Hogan’s electorate of Page overlaps the state seat of Lismore. He too backed the expansion of the reinsurance pool, telling Guardian Australia he was “very supportive of that”.

Federal Labor MP Justine Elliot, whose seat of Richmond covers devastated Mullumbimby, said “we need to be having those conversations moving forward”.

“This is their home, people want to stay here, but lots of people don’t have insurance because they can’t afford it,” she said. “What we need is housing, short and long-term, particularly for thousands of people who have been living in caravans.”

Greens state MP for Ballina, Tamara Smith, said insurance premiums for her constituents could easily top $1,000 per month – which many couldn’t afford.

“Reinsurance is so necessary. Most businesses and most homeowners here just aren’t insured,” Smith said.

She said it was too early to make long-term rebuilding decisions, but suggested governments could offer to buy back people’s homes or incentivise them to rebuild in areas out of immediate flood danger.

“That’d be really sensible. There will be people who want to rebuild, people who want to leave,” Smith said. “It’s cruel to have the conversation now but we have to think about what adaptation to climate change looks like.”

Graham Perrett, the federal Labor MP for Moreton in Brisbane’s south, said locals in his electorate had been quoted more than $7,000 annually for flood insurance. After the 2011 floods, some insurers simply declined to offer flood insurance.

“We’ve got to rebuild better, or maybe not at all in certain areas. I don’t like to say that, but the past 11 years has really focused people’s minds on insurance, cost, and building flood resilience,” he said.

Perrett claimed some residents received a general “postcode rejection” from some insurance providers who should instead undertake individual assessments to analyse the mitigation or resilience work homeowners had undertaken.

He said Labor backed the reinsurance scheme and he voiced tentative support for expanding its remit – but said a more fundamental challenge was disaster mitigation.

“Anything you can do to drive prices down is something we’d support … but if you’re not pumping money into resilience and preparedness, I could see it being a false saving,” Perrett said.

That was echoed in a Senate committee hearing into the reinsurance scheme. Mathew Jones, the general manager of public affairs at the Insurance Council of Australia, said his group wanted to see a doubling of government spending on disaster preparedness.

“Reducing the cost of reinsurance is only one part of improving the affordability and availability of insurance,” Jones told the committee.

“Sustainable reductions in premiums over the long term and better protection for at-risk communities will only be possible with significant investments to make communities more resilient to extreme weather risk.”

He said insurers in Queensland and NSW had received nearly 100,000 flood-related claims in the past two weeks alone, estimated to cost $1.45bn. Jones expected that number to keep climbing.

Tyrone Shandiman, of the Northern Australia Insurance Lobby, also voiced concerns about the cost of cover for at-risk communities.

“We are coming across clients that can’t get insurance, are paying 20 times as much for insurance than properties that are similar in Brisbane and Sydney,” he said. “If that’s not market failure, I’d hate to see what a market failure was.”

Tracy Green, from Queensland insurer RACQ, also called for governments to fund more disaster resilience. She said the RACQ backed the expansion of the reinsurance scheme and would support the nationalisation of all disaster reinsurance.

“There should be a pool that’s not just limited to cyclones, it should cover all perils,” Green told the upper house committee.

A report by the Australian Competition and Consumer Commission recommended direct subsidies as a tool for bringing down premiums rather than the reinsurance pool the Coalition ultimately adopted.

The commission in late 2020 found reinsurance pools supported the insurance industry rather than improved affordability.

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