Bushfire predictions a wake-up call for insurers

Oct 2, 2014 -- A new report warning the country’s fire seasons are getting drastically worse should act as a red alert for underprepared insurers, according to one of Australia’s top catastrophic risk experts.

The Bushfire and Natural Hazards Cooperative Research Centre’s (BNHCRC) report released last month has predicted Australia’s fire seasons will begin earlier, last longer and have an increased risk of  catastrophic fire events.

Nick Hassam – senior catastrophic risk analyst with  reinsurance giant Willis Re Australia – said, armed with this knowledge, the industry must adopt cutting-edge mapping technology to more accurately identify exposure to bushfire risk.

Smart mapping allows insurers to layer critical information – such as up-to-date vegetation and topology datasets together on a map,” Mr Hassam said.

“When this is analysed against maps displaying where their customers’ properties are situated, insurers can begin to build a detailed picture of a landscape and its risk of bushfire in relation to customers’ assets.

“The technology enables them to determine an individual property’s risk level, as opposed to the traditional approach of looking at an entire postcode’s exposure.

“Given Australia’s bushfire future, insurers must start performing that level of analysis to ensure their risk selections are appropriate and their premiums are accurately priced to cover any expected losses.

“If they don’t, they risk being left highly exposed to individual events and overtaken by insurers who are more accurately pricing their policies.”

Mr Hassam will speak in Adelaide today to the country’s leading insurance professionals at the Esri Australia user conference – the nation’s largest spatial industry event.

Esri Australia Industry Manager for Insurance, Neale Walsh said any organisation responsible for vegetation clearance and asset management in bushfire prone areas should also heed the BNHCRC’s projections.

“Departments responsible for forestry, for example, and  electricity and water companies are held accountable for reducing bushfire hazards around their assets and, inevitably, the public’s as well,” Mr Walsh said.

“Assuming above average bushfire seasons become the new norm, these organisations will become potentially more open to compensation claims and must become more vigilant in the areas of identifying, managing and mitigating current risks.

“Smart mapping technology provides these organisations with powerful tools to assess and calculate their risk.

“Similarly, insurers and brokers could use the technology to work with their clients in this regard.

“By exposing a client to such a comprehensive level of information, they can help them understand the risks they face in their particular location.

“In doing so, those working in the insurance industry can build on existing relationships by helping end clients make better decisions based on their risks.”

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