Deloitte sets out recommendations for insurers following record ~A$6bn 2022 flood loss
Deloitte has set out a series of recommendations for the Australian insurance industry in response to last year’s record-breaking A$6bn ($3.82bn) flood loss event in southeast Queensland and New South Wales.
The consultancy firm has set out seven recommendations for the sector, including the need to improve planning for catastrophic events.
Deloitte said this should include developing detailed catastrophe response plans, conducting operational and economic stress tests to identify portfolio vulnerabilities, and completing post-event reviews within 12 months of the initial event.
Policy terms should also be inspected and altered if they create bottlenecks, while the Insurance Council of Australia (ICA) should consider the introduction of a baseline category in the Insurance Event Management Plan to support industry preparedness.
Deloitte’s second recommendation focused on improving the customer experience during catastrophes.
This includes a review of how insurers can improve catastrophe communication, streamline their strategies to assist the most vulnerable, improve the way they use the “voice of the customer”, and enhance the claims handling experience through governance and quality assurance standards.
The third recommendation said insurers should redesign resourcing capability for cat events (particularly in reviewing workforce planning), address resourcing models, and improve catastrophe onboarding, training and competency management.
Deloitte also called on insurers to assess the operational efficiencies of their catastrophe response, including reducing manual processes, triaging to accelerate claims, adopting automation technologies, and placing greater emphasis on customer interaction.
Its fifth recommendation said insurers should improve their capacity to leverage data, suggesting that the ICA could develop strategies to collate and communicate claims data to improve timeliness and quality.
Deloitte’s sixth recommendation focused on greater coordination with the Australian government.
This firstly related to agreement over information requirements to improve disaster funding-related processes.
It also suggested that insurers and government develop guidance over severe event clean-up processes, as well as finding ways to co-incentivise investments in resilience measures.
Deloitte’s final recommendation said the definition of an “extraordinary catastrophe” requires rework.
This includes consideration over the timing of relief, minimum commitments insurers are expected to meet, and other factors that could be subject to relief.
Last year’s flooding saw 242,351 claims and was the costliest event in Australian history.
Deloitte found that 39,334 claims were left outstanding 12 months after the event.
Insurers’ handling of the process saw 34,269 complaints, 44 percent of which were due to complaints over delays in the claims handling process.
While 94 percent of claims closed within 30 days, 1,712 were escalated to the Australian Financial Complaints Authority.
This context prompted the ICA to appoint Deloitte to undertake the external review of the industry’s response.
The review looked to identify lessons learned from insurers’ response to the floods – both from good practice and practices requiring improvement – to better prepare and inform the industry’s response to future extreme weather events in a changing climate.