After the flood, backstopping the recovery
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Zurich is in top gear and will stay there until its flood-affected small business customers are back on their feet, mentally recovered and as disaster-proof as possible
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THE MARCH flooding in southeast Queensland and northern NSW is keeping insurance companies like Zurich busy as businesses go through the clean-up and rebuild process.
“The level of water seen in some areas surpassed any flooding in recent memory,” says Zurich head of SME Theo Pitsikas.
Zurich quickly realised the scale of the disaster was enormous. Damage varied from property inundation to water run-off from flash flooding, and water ingress from leaking and damaged roofs as a result of the storms. Many buildings required stripping back due to the amount of water inside the properties.
The Insurance Council of Australia initially put the total damage at $2.5bn. This was later revised to $3.3bn, making it Australia’s costliest flood ever. The final figure may be as high as $4bn, according to industry analysts.
Damage to buildings is only one side of the story. Replacement parts are proving tough to find, and supply chains Australia-wide have taken a hit. Even businesses with little flood damage are still affected due to not being able to source material, and many are now lodging business interruption claims.
Dealing with the influx of claims quickly is key to getting SMEs back on their feet, and Zurich has already made significant progress in working through the extreme demand.
“We immediately invoked our response plan, began the mobilisation phase and are currently in the thick of the claims fulfilment,” says Zurich head of general insurance claims James Dimitriou.
Zurich Financial Services Australia is the local arm of Zurich Insurance Group – a leading multi-line insurer that serves global and local markets. For 100 years, Zurich has combined global expertise with local care to provide leading wealth and insurance solutions. Zurich’s general insurance business is dedicated to a fully intermediated broker advice model. This approach is paired with a state and regional presence, empowering local teams to make local decisions on the ground. We are passionate about our purpose to ‘create a brighter future together’ and use our resources to contribute to communities through disaster resilience, community partnerships and sustainability.
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2022 flood claims – SE Queensland and NSW
Number of claims
197,000
“We immediately invoked our response plan, began the mobilisation phase and are currently in the thick of the claims fulfilment”
James Dimitriou,
Zurich
Dimitriou says Zurich has already bolstered its key teams by around 50% for the next 12 months so that they can service all business customers effectively at this difficult time.
Speed is of the essence, as SMEs do not have the deep pockets of large companies and every day counts when it comes to business continuity.
“Many SMEs are vulnerable to long-term impacts and possible business failure from even short-term outages or closures,” says Pitsikas.
Smaller businesses are often geographically clustered together, with owners and workers usually living nearby.
This means that it’s not unusual during natural disasters for employees to be dealing with personal losses at the same time.
“In regional centres, SMEs and their employees often live in the township and in catastrophic affected areas like Northern Rivers,” says Pitsikas. “Not only have they lost their business income, but they have also lost their wages, homes, cars, animals and, sadly, friends.”
In such tragic circumstances, insurance also has an important psychological role to play. When all seems hopeless, having a
claim come through quickly sends the message that not only is rebuilding possible but the insurer sees your business as a priority.
“At Zurich our purpose is to create a brighter future for our customers, and that shines clearly at disaster times like this super catastrophe,” says Dimitriou.
Having certainty around finances allows the insured to move on from the damage itself and begin rebuilding. Speedy lodgement and providing clarity on the next steps, as well as immediate and meaningful emergency payments where appropriate, are some of the key responses to helping customers.
“Partial payments are one way of getting money to where it’s needed quickly,” says Pitsikas. A robust online claim process also speeds things up.
Zurich has an easy-to-use broker platform, Z Track, for lodging claims online. The system provides 24/7 claims tracking and reporting, allowing brokers to stay up to date with the progress of a claim. You can even opt in to receive an email when something has changed on a claim.
“This ensures that customers and brokers don't need to waste time calling or worrying about the status of their claim, as it’s all observable online. Claims and underwriting queries are dealt with promptly, with the result being that customers are better informed on the progress of their claim,” says Pitsikas.
This is one way to mentally support the recovery process, but counselling-type support is also sometimes essential for business owners and employees as they face difficult decisions about the future.
“Zurich has provided access to mental health support in partnership with Benestar, including initiatives such as critical incident support, grief support, or support for organisational change”
Theo Pitsikas,
Zurich
“Due to the catastrophic nature of this event, Zurich has provided access to mental health support in partnership with Benestar, including initiatives such as critical incident support, grief support or support for organisational change. The reality for some SME business owners following this event is that they may make the decision to not reopen as they have suffered multiple catastrophes over a number of years,” says Pitsikas.
“This event and the devastation it reaped on communities has been the final straw for some.”
For those able to continue, avoiding any similar future event is top of mind. The Productivity Commission has estimated that 97% of natural disaster funding in Australia is spent after an event, with just 3% invested in advance to mitigate the impact of future natural disasters.
More emphasis on mitigation is needed to alleviate the worst effects of what are becoming more frequent extreme weather events. Methods include pushing local governments to introduce or increase levees for flood-prone areas or to simply prevent SMEs from rebuilding in areas that are vulnerable to disaster.
the pandemic, supply chain issues or the availability and cost of workers and material. Underinsurance has also potentially stemmed from decisions by insurers concerning the insurability and pricing of cover in certain areas.
“Rather than reacting to a particular event such as the March floods, a more systematic review of the flood insurance process and guidelines is needed,” says Pitsikas.
TYPES OF INSURANCE HELD BY SMEs WITH FLOOD COVER, TOWNSVILLE 2019
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Value of claims
$3.3bn
Source: Insurance Council of Australia; data as of 3 May 2022
Insurance companies are also placing higher emphasis on mitigation. SMEs that get sound advice from brokers about what products are available, and that recognise the value that business interruption insurance provides, will be better placed for future events, says Dimitriou.
Another key role brokers play is in making sure SMEs are not underinsured. With most modelling showing the likelihood of greater extremes of rain and more extreme heatwaves, it's important that SMEs base their coverage on the latest and most accurate information.
Recent market dynamics have unfortunately led to some underinsurance as businesses have avoided updating policies or sought to control costs due to other external factors such as
Businesses with a building to insure
Source: Australian Competition & Consumer Commission
11%
21%
0%
5%
0%
28%
0%
Building, contents and business interruption
Building and contents
Building and business interruption
Building
only
Contents and business interruption only
Contents
only
Business interruption only
Businesses without a building to insure
33%
0%
0%
2%
Contents and business interruption
Contents
Business interruption
Unclear
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