ICA CEO outlines plan to address the growing protection gap in address to the National Press Club

Last Thursday, Andrew Hall, CEO of the Insurance Council of Australia gave an address to the National Press Club highlighting the growing protection gap in Australia and the consequences for households, particularly those in low socioeconomic areas, if the gap is not addressed.  

The protection gap refers to the difference between total economic losses and the value of losses covered by private insurance. Modelling by global reinsurer, Swiss Re, places the protection gap in Australia at 35 per cent. In 2022, this figure increased to 48 per cent following the catastrophic floods East Coast flooding event. 

Protection gaps are often used to indicate a country's’ resilience to natural disasters, with a high protection gap indicating that households and businesses may not have sufficient levels of insurance to enable them to recover from disasters. 

In his address, Hall reflected on compounding effects of increasing premiums and rising costs of living, pointing to recent modelling by the Actuaries Institute that shows an increasing number of Australian households are experiencing home insurance affordability stress  

“Increasing financial stress is leading to a rise in people who are not insured or are underinsured (…) More and more people are crossing their fingers and hoping that luck will hold their way,” said Hall. 

 Widening of the protection gap can have serious implications for Australian households and families, particularly lower and middle-income earners who are disproportionately impacted when disasters occur. This, in turn, places increased pressure on governments to bear the costs of recovery.  

“A greater reliance on government and not the private sector will mean that taxpayers will carry much more additional risk, putting even more pressure on government budgets.” 

In his address, Hall outlined a three-pronged approach to address the issue of a widening protection gap – incorporating short, medium and long-term actions. 

Recognising that immediate action is required to increase affordability, Hall advocated for taxation reform at both the state and Federal level as one lever to reduce premiums.  

“For a long time, insurance has been seen as a taxation cash cow, little different than alcohol and cigarettes (…) For the sake of our future protection and productivity, Australian governments at the state and Federal level must have an eye on reform of insurance taxes” 

Increased investment in disaster mitigation and the need for better planning of infrastructure and development including taking the increased probability of natural disasters into account when determining where development takes place and the standard to which it is built were also raised as longer-term solutions to derisking Australian communities.  

“All too often, we have built our homes in places where we can touch and feel and absorb nature – in bushland, on river frontages, and backing on to beaches. But in so doing, we have put ourselves on floodplains, in fire-prone bushland, or coastal areas in direct paths of cyclones. We have ignored the red flags of nature,” said Hall. 

You can read the full transcript of Andrew Hall’s address to the National Press Club here, alternatively, the address is available to watch on ABC iView.