More risk for Australian insurers ahead
Following the Bureau of Meteorology’s (BOM) announcement of a continued La Nina weather trend, the Insurance Council of Australia (ICA) has encouraged Australians to prepare their properties for a wet spring and potentially summer across eastern Australia as third La Niña brings fears of renewed flooding[1].
Australia has already seen an influx of extreme weather conditions such as severe floods with serious impacts and consequences on all aspects of the communities that the natural disasters have impacted.
Insurers will have to brace themselves for a potentially significant rise in claims that will need to be managed in not only a timely but most importantly empathetic manner.
Severe weather warnings pose more risks for insurers
The ICA reports that the combined insurance damage bill for the storm and flooding caused by La Nina on the East Coast in 2021 and 2022 came to a staggering AUS $5.92 billion, with more than 296,000 claims filed. According to a recent analysis commissioned by the ICA, the direct costs of extreme weather will reach $35.24 billion in 2022, with the average annual family cost of extreme weather over the past ten years being $888.
In 2050, that number is projected to rise to more than AUS $2,500. A number of these weather conditions are more immediate, while others, such as increased disasters driven by climate change, are longer-term. All of these increase the level of uncertainty that insurers must manage.
Insurers either raise premiums to cover costs or if they use shareholder cash, they must return investors lower earnings [2]. Since these weather events impact Australia and the insurance business globally, they will also increase the reinsurance rates that insurers must pay to manage and mitigate their overall risks.
Cyber resilience is needed. Now!
The weather is not the only worry insurers should have in terms of risk. Over $33 billion in self-reported losses from cybercrime occurred in Australia during the 2020–21 fiscal year, and this week, Optus revealed they were subject to the largest Cyber hack in Australian history.
Companies in Australia are increasingly considering cyber insurance as a significant (but not exclusive) component of their risk management “toolkit” due to the escalating costs of cyber accidents. As great as it is to have such ‘toolkits,’ organisations will need the right talent to drive/use them in a way that circumnavigates the potential of cyber risk. The right cyber talent will be key moving forward, as understating new age cyber risk will not only de-risk your systems and platforms but will ensure heighted cyber security regulations are met.
Cybercrime activity has become a key focus for ASIC, who are now focusing on ongoing disclosure requirements, director responsibilities, and other regulated entities that hold Australian financial services licences from an enforcement standpoint. Regulators are warning that enforcement action may be taken where organisations have broken their commitments.
Regulators will want to see organisations providing evidence of sufficient KYC and AML measures on behalf of the insurers at the point where claims judgments were initially made is another significant risk element connected to the claims issued during the collections process. As a result, there will be an increased need for investigation and fact-checking teams to make sure that all necessary precautions have been taken to prevent fraud or any other financial crime.
Skills shortages in Australian insurance market could pose serious risk
Insurance took seventh place for being the industry with the most extreme skills shortages in Australia[3]. The top industry was banking, which was followed by manufacturing, building, technology, engineering, and architecture. The top three categories were healthcare, mining, and retail.
According to a recent statement by the Australian Prudential Regulation Authority (APRA), difficulties facing the general sector include supply chain disruptions, skill shortages, inflationary pressures, and cyber risks.
Skills shortages have reached a level unequalled in Momenta’s decades of Global recruitment and this has triggered purposeful salary rises from firms. Within Australia, insurance brokers, technical claims managers, SME underwriters, contact centre agents (lodgement), and claims assessors are the top five insurance positions that need to be filled. Underwriters, brokers, loss assessors, claims handlers, and broker assistant were all listed as key shortages within the New Zealand market.
Many insurers are turning to the contingent workforce to help combat the skills shortage seen -especially within their claims and underwriting departments. Over the past year or so, the advantages of a contingent workforce have become abundantly clear. The global recruitment landscape has evolved from the great resignation to the great reshuffle, and we are seeing changing landscapes in global hiring models especially those in insurance organisations.
Why choose Momenta?
Momenta specialises in assembling small- or large-scale teams of individuals on demand and can assist with the creation and delivery or training if required. Depending on the needs of the project, Momenta can scale resourcing requirements up or down as necessary.
With more than 30 years of global experience within the Financial Services industry you can be assured of our ability to provide a complete cost-effective solution or specific components to compliment your current capabilities and skill set.
Our team members are seasoned, client-focused experts with the sensitivity and empathy necessary to manage claims and understand how businesses and people alike have been affected by natural disasters.
Works cited:
[1] Light, J., Bloch, V., Anderson, J., Marsh, R. and Gallego, E. (2022). Backing up the backups: cyber insurance in a hardening market. [online] www.allens.com.au. Available at: https://www.allens.com.au/insights-news/insights/2022/09/cyber-insurance-in-a-hardening-market/ [Accessed 20 Sep. 2022].
[2] Libatique, R. (n.d.). ICA urges Australians to prepare for La Nina. [online] www.insurancebusinessmag.com. Available at: https://www.insurancebusinessmag.com/au/news/natural-catastrophe/ica-urges-australians-to-prepare-for-la-nina-420957.aspx [Accessed 20 Sep. 2022].
[3] www.insurancenews.com.au. (2022). Insurers to up pay in ‘once in a career’ skill crisis – Daily – Insurance News – insuranceNEWS.com.au. [online] Available at: https://www.insurancenews.com.au/daily/insurers-to-up-pay-in-once-in-a-career-skill-crisis.
