RACQ Group CEO David Carter, Chief Executive Insurance Trent Sayers and General Manager Property and Niche Claims Paul Goan appeared before the parliamentary committee. The following is Group CEO David Carter's opening statement: 

Thank you, Chair.

RACQ thanks the Economics Committee for its interest in the issues and challenges arising from the 2022 floods. We also welcome the Committee’s intention to ensure Australians are looked after when disaster strikes, and they have access to affordable insurance. My name is David Carter, and I am the Managing Director and Group Chief Executive Officer here at RACQ, joined by Trent and Paul.

RACQ is pleased to offer our perspectives to the Committee on these issues today. For the benefit perhaps of the non-Queensland Committee members, I’ll start with a very short overview of who we are.

RACQ is Queensland’s largest member-owned organisation. We have more than 1.7 million members and 118 years of service. Today we provide insurance, banking, roadside assistance, travel and solar energy products, services, and solutions across the State. 

As a mutual, RACQ exists solely for the benefit of our members. We stand for our members, and we are seen and heard in our advocacy efforts each and every day. We also reinvest our profits back into community. Last year, $10 million was provided to disaster-impacted communities, a range of charities such as the Air Rescue Network, and our education team that works with 60,000 students of all ages each year, to make them more informed and to help them make better choices as road users. 

With 2,700 employees and 28 stores, we are immensely proud of our heritage of helping Queenslanders in virtually every corner of the State. Last year we managed more than 170,000 insurance claims and carried out more than 750,000 roadside assistance jobs. We are passionate about making Queensland safer and more resilient.

Our home State is a wonderful place to live and work but it is often synonymous with natural disasters. RACQ Insurance has had more than 50 years’ experience responding to and recovering from cyclone, flood, fire, hail, and storm. Every disaster is different and presents a learning opportunity.

If I can cast you back briefly to 2020, when Springfield, near Ipswich, experienced a brutal hailstorm on Halloween which crashed through roofs and left many families displaced and desperate for assistance. As an insurer, we were found wanting in the early stages of that event. We simply did not meet the standards we set ourselves and our members expect from RACQ.

We used this humbling experience to tackle our shortcomings and be better prepared for the next event. We identified a number of critical improvements such as having less reliance on external assessors, introducing greater quality assurance and governance over panel builders, contractors and third parties, leveraging our entire workforce to tackle the initial spike in calls and digital contacts so claims are referred and assigned faster, and opening up better and more frequent lines of communication for our members so they are kept informed.  

We move forward to 2022 and we faced another catastrophe which tested the changes and improvements we had put into place in the year prior. The floods, or CAT 221, were devastating and many of our members suffered great loss and trauma. We received 13,322 home claims and 2,740 motor claims from members during and after the floods, mostly from South East Queensland with a much smaller number from northern New South Wales. Our Queensland focus meant our share of home and contents claims for CAT 221 was around 7 per cent of the overall industry. Yet even with only 7% share at the peak of our repair period we still utilised more than 2,500 tradespeople across SEQ and northern New South Wales. As I speak, we have managed to finalise 98 per cent of home claims and more than 99 per cent of motor claims. 

The job is not quite finished, and we are still receiving a handful of new claims each month. We have set up our business to ensure there is ongoing support for those remaining claims while also tackling business as usual and indeed the more recent weather event claims here in Queensland. 

I want to turn to the experience of members when claiming. Member metrics are typically equal weighted with financial results in RACQ’s executive scorecards, and we make a significant investment in ongoing tracking and action on member satisfaction. 

In terms of claims, we track satisfaction post the lodgement of the claim and post-completion of the claim. Lodgement satisfaction is generally always higher than post-completion. At the 12-month mark for event 221, we saw a member satisfaction score of 82 per cent for completed claims. The vast majority of members who made a claim have had an acceptable experience with RACQ.

But I know there are some cases where we did not do so well. We still saw cases of unnecessary delays, poor communication, and errors of judgement. On reflection, we tend to get things wrong when we forget to put ourselves in the shoes of our members. For many, it is the first and maybe the only time they will lodge an insurance claim. They’ve lost their personal belongings, they may have been forced out of their home, and their memories have been taken away in one cruel blow. They are typically dealing with a multitude of other issues at the same time - speaking with their bank, explaining the situation to their employer, re-assuring their loved ones, nursing injuries, and cleaning up. Some even help their friends and neighbours who are in a worse spot than them. Dealing with their insurer is the last thing many people in this situation want to do. We know some feel intimidated by the process and that should never be the case.

Where poor cases have been identified, RACQ has urgently sought to rectify and get them back on track. As the Group CEO I make it my business to ensure I am experiencing the event alongside our staff. I take claims calls myself, I hear direct from our members at the exact time that they feel most vulnerable - hit by a disaster and asking for their insurer to help. I am joined in that activity by a number of my executives at the time.  As it happened, with CAT221, I found myself out of my own home after the 2022 floods. It is a terrible time for those affected. 

I regularly meet people in our claims teams, our stores, and across our supply chains. They are at the frontline, interacting with our impacted members every day. And they carry that responsibility and perform their roles extremely well. They talk to me about the hurt and distress our members go through, the challenges that they themselves face, but most importantly, their plans and commitments to help our members get through their darkest times. I can confidently say that not one of our employees sets out to make our members’ lives difficult. There are times where RACQ’s processes and systems have let our own people down, and in turn, let our members down. We apologise for these cases.

Our industry often talks about the losses in excess of $6 billion which puts the event’s size and scale in the right insurance context. But that only quantifies half the impact - the physical side. Deloitte Economics estimate the floods brought social and health impacts costing $4.5 billion. The event killed 13 and injured 200 people in South East Queensland and 22,000 psychological first aid visits were made through the region. RACQ reflects on these sorts of impacts when we seek to learn how to be a better insurer.

Since the floods, we have minimised our reliance on automated messaging to communicate to our members. Members who have been impacted by weather events this summer are getting more tailored and useful updates and advice from RACQ. We’ve further enhanced training and capability across our claims staff, our systems that interact with our panel of builders are smarter and are able to path claims straight to individual builders at greater pace and our workforce planning was much more advanced in the lead-up to this summer. 

The 2022 floods showed us other things like the importance of good, strong policy cover. We regularly hear from our members, especially in times of catastrophe, that this is what they highly value from RACQ. After the 2011 summer of disasters in Queensland, the Club heeded some valuable lessons.

We had a choice – we could change our policies and give members clarity, confidence and certainty after a flood or continue providing only partial flood cover. We chose clarity, confidence, and certainty. I’d like to reiterate what we put in our submission – RACQ is not concerned with where water comes from. It could be storm, riverine, creek, or flash flooding. Our policies cover for all types of water-related damage, so we do not need a hydrologist.

This goes for all of our policies because we unashamedly will not let anyone remove flood cover. There is no such thing as ‘opt out’ at RACQ. Our comprehensive policy cover has been instrumental in RACQ accepting 95.5% of all home claims and 96.9% of all motor claims from the 2022 floods.

As the entire industry has been at pains to point out, we must price for the risk that we’re taking and so fundamental to running a sustainable insurance business is collecting enough premium to pay all our claims each year. 

Now we acknowledge that for those living in vulnerable areas, flood cover, along with rising inflation, supply issues and growing climate impacts are bringing accessibility and affordability pressures. 

The insurance industry, and RACQ as part of that, has a role to play in keeping their overheads down and profits at reasonable levels.

Importantly, there are opportunities for governments at all levels to also play a role. I know you’ve heard from a range of parties on these topics, so I won’t labour on all of these points but for the record, these opportunities are:

• Land use planning
• Building standards
• Greater investment in resilience and mitigation – at both the individual property and public and community infrastructure level
• Taxation including stamp duties.

Higher building standards can be a very effective form of mitigation. We saw this after Cyclone Tracy when new housing stock across northern Australia was required to be built to withstand higher wind speeds. Resulting cyclones have tended to cause less damage to more modern homes than pre-1980s stock.

We warmly welcomed the Federal Government’s significant increase in disaster resilience funding through the Disaster Ready Fund, matched by the states. RACQ also helped the Queensland Government design and implement the Resilient Homes Fund, which is helping homeowners build back better and withstand future extreme weather events. 

Affordability is also being impacted by significant taxes on home insurance. The riskier your home is, the more tax you pay, and we believe that is unfair. In Brisbane, the average premium is $2,062 for an average sum insured of $573,766; in North Queensland, the average premium is $3,624 for an average sum insured of $386,526. 

So North Queensland is paying about one and half times more premium than Brisbane. Because GST and stamp duty are charged as a percentage of premium, this same average North Queensland homeowner is paying $302 GST and $299 stamp duty on their premium while the average Brisbane homeowner is only paying $172 GST and $170 stamp duty. The North Queensland homeowner pays 70% more in tax for a sum insured that is 30% lower. Much more tax for less asset value insured. The double tax on insurance should be addressed at some point. 

Finally, given recent weather events in Queensland, it would be remiss of me not to raise the Cyclone Reinsurance Pool. I stress that the pool has no impact on the outcome of the claim and the cover that is detailed in our members’ policies. The pool is an arrangement between the insurer and Government, not between an insurer and policyholder and therefore has no bearing on the outcome of a claim. 

But, put simply, its current design and implementation is not achieving the policy objective to deliver the actual dollar savings that our members and the community in the north were expecting. 

We would welcome a fast-tracked review that will bring timely improvements. At the top of the list, is the removal of the ‘48-hour rule’; it just adds complexity and cost. Consideration should also be given for the pool to cover flood, but we recognise this position does not receive majority industry support.

RACQ thanks the Committee for the time to make these opening remarks. We seek to learn from every disaster, continually improving how we respond and support our members. We did not get everything right after the 2022 floods. We have good people who want to do the right thing by our members. And that’s the most powerful driver of continuous improvement at RACQ. We are happy to respond to any questions.