She said when a natural disaster strikes a remote community, it usually takes more than three months for a claim to be assessed and repairs to be underway.
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“So this is a band-aid for this interim period so that they get their money right away and they can basically stay in their community and pay their bills,” Hardy said.
There is no proof of loss associated with parametric insurance, and with Redicova, customers can purchase as much insurance as they want.
“We have tried to alleviate the affordability problem by allowing the purchase of a single unit if they wish,” she said.
Redicova is supported by Lloyd’s Disaster Risk Facility (DRF).
“It is outright a financial band aid to help them get through the tough times because there is no one after a severe tropical cyclone who does not suffer economically,” Hardy said.
Earlier this year, a parametric insurance policy underwritten by the Caribbean Catastrophe Risk Insurance Facility (CCRIF) was triggered by the magnitude 7.2 earthquake in Haiti and made a record payment of $ 40 million.
Less than a week after the disaster, CCRIF had paid $ 15 million of the claim to the Haitian government, highlighting how quickly and effectively parametric insurance can support devastated communities.
For parametric insurance, payments are triggered automatically once a predefined threshold of an index is reached. Policyholders are paid without going through what can be a very lengthy insurance claims and claims settlement process.
“Without knowing the details of the product itself [Hardy’s Redicova], I would say that collectively across all industries we shouldn’t be afraid to look at innovation and new solutions and what happens with that is you also get new emerging business opportunities ”, said Ramana James (top photo), Insurance Australia Group (IAG) Executive Managing Director for Safer Communities.
“So that can be a really good thing, because instead of governments having to foot the bill, the private sector comes up with solutions. “
Last month, Insurance Australia Group (IAG) launched its new Climate and Disaster Resilience Action Plan. The FY22-24 plan focuses on finding solutions to face climate risk and defines climate commitments in various areas of intervention.
“I think the nature of the complexity of these events and their impact on the economic system means that there is going to be a diverse suite of products that will allow us to support and protect customers. So we are encouraging innovation in this space, ”said James.
He said the rise of various insurance products is not a sign that the industry has given up on providing affordable insurance in areas of Australia prone to natural disasters.
“No, I think the industry is strongly committed to working with governments to make sure that we don’t find ourselves in a position where you have uninsurable positions, that’s what we want. We all want insurance to be an essential part of our financial system that allows individuals, then communities, to recover and eliminate this burden on governments and ultimately taxpayers, ”he said. declared.
James said the most important work that needs to be done is on improving the safety and resilience of infrastructure, buildings and assets.
“If we work together, as insurers, as governments, other financial service providers, other industries, to help improve the resilience and security of homes, to improve infrastructure, then we can make sure we have built enough security and risk reduction into the system, ”he said. “Then we can continue to have affordable insurance for people across Australia. “
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James said research analyzing the economic and social costs of natural perils and disasters has found that investing money in adaptation can lead to huge savings.
“So the return on investment in adaptation is important so that you don’t then spend the money on recovery and that fixes the problem at the source,” he said.
New National Insurance Brokers Association (NIBA) CEO Phil Kewin (pictured immediately above) couldn’t say if parametric insurance is an adequate gap filling, but agrees that a solution at scale sector is needed.
“It’s pretty obvious and we talked about it at the recent Insurance Council summit, the challenges we face around natural disasters and the challenges especially in North Queensland,” he said. “The Insurance Council wants to find an industry solution, which is why it created the Business Advisory Council (BAC) which Dallas Booth chairs. “
The BAC was created in response to recommendations from the Private Commercial Insurance Market Review by industry expert John Trowbridge. The board held its first meeting in October and aims to improve the affordability and availability of commercial insurance products for small and medium businesses. Some of the same issues impact insurance options in Australia’s natural disaster areas.
“I’m hoping the industry can find some affordability and accessibility solutions because it’s becoming a problem,” Kewin said.