In recent months, Australians have come face-to-face with some of the most catastrophic bushfires in history. Fires have ravaged more than ten million hectares of land, taking the lives of at least 29 people and leaving over 2,000 homes destroyed in their path. They have pushed more than one hundred threatened species towards extinction, and it’s expected that more than one billion animals have perished.

The impact of this national disaster on the insurance industry is outlined in the below information from PSC Connect.

Fears of Underinsurance

Since the 8th of November 2019 there have been over 13,750 bushfire-related insurance claims lodged, totalling more than $1.34 billion in compensation. As further assessments of bushfire impacted communities are made possible, this figure is expected to grow.

However, as homeowners prepare to rebuild it’s feared that many will discover the funds they are insured for are insufficient. With the intention of avoiding expensive premiums, many people opt for a lower sum when taking out their policies. Other people may find themselves underinsured due to the increased cost of building to meet the new bushfire standards, which often require more expensive materials. These factors can put significant strain on communities as residents begin the process of rebuilding.

Reinsurance Implications

Despite the sheer magnitude of the ongoing bushfires, it’s expected that their impact on reinsurance will not exceed that of previous significant fire events.

This is largely due to the fact that the areas hardest hit by the fires were relatively remote. In most cases less than 10,000 people resided in affected towns, with one property exposed every 4.5km2. In previous significant fire seasons (ACT in 2003, Victoria in 2009, NSW in 2013) there was more than one property exposed every 1km2.

One aspect of insurance that may be affected is that the terms of reinsurance contracts may impose certain limitations. These might include conditions relating to the duration of the disaster, and the distance or territorial boundary covered by the policy.

In the past 4 months TJL have handled a number of insurance claims for clients who have suffered damage from the bushfires. To discuss any aspect of your insurance please just give us a call and we will be happy to assist.