In the heart of the storm

In the heart of the storm

RACQ Insurance chief Tracy Green is ready for an active summer as pressures rise in northern regions

By Wendy Pugh

With affordability stresses and natural disaster impacts rising in Australia’s north, RACQ Insurance is in the eye of the storm and a leading voice in the industry’s calls for improved resilience and measures that deliver lasting community benefits.

As a major player in Queensland’s personal lines sector, the insurer has experienced some of Australia’s worst catastrophes in the past decade, including Cyclone Yasi and the 2011 Brisbane floods. And risks are high this year for another active summer.

The Insurance Council of Australia (ICA) declared its first catastrophe for this season after giant hailstones struck southeast Queensland at the end of October, and the Bureau of Meteorology has warned a rain-inducing La Nina system is set to persist for the next few months.

RACQ Group Executive Insurance Tracy Green, who took up the role formally mid-year, says planning has been done for the coming season, while the company is also focusing on longer-term resilience issues as it continues to offer cover across the state.

“We don’t red-line anywhere, so we offer insurance at the appropriate price and we spend quite a lot of time talking with our members to ensure we understand the risk,” she told Insurance News.

Ms Green lives in Cairns in Far North Queensland, travelling to her Brisbane head office and regional areas as required.

So she is more aware than most of the natural catastrophe risks the region carries, and the related insurance issues of premium affordability and the need for mitigation strategies.

“We obviously support mitigation and private mitigation coming through, so we have discounts built into the premiums where people have upgraded the property,” she says. “North Queensland is obviously near and dear to my heart, given I live here.”

RACQ’s submission to the Royal Commission into National Natural Disaster Arrangements backed the industry case for government spending on mitigation, improved building codes, retrofitting measures and better land-use planning.

The submission highlighted the Townsville suburb of Idalia, adjoining the Ross River, as an example of recent development in a high-risk location that was then hit by flooding. Ms Green says there’s a need to stop building properties in floodplains and to address shortcomings at existing properties.

“When we have a look at Townsville and see what has transpired there, we can take a lot of lessons into the future,” she says. “Certainly there are opportunities to build up greater resilience for those properties over time. The Townsville mayor, for example, is very focused on what that might look like into the future.”

RACQ’s annual review last year described the February 2019 Townsville flooding, triggered by days of torrential rain, as the second-biggest insurance event in the group’s history, with an estimated cost of $115 million.

The catastrophe and rising premiums reignited pressure from some groups for a government-backed pool to improve affordability in the tropical north. Federal Assistant Treasurer Michael Sukkar decided to take another look and called on insurers to assist with inquiries.

Ms Green says RACQ Insurance is happy to have a seat at the table as the issues are considered and practicalities explored, but warns that (re)insurance pools are not ideal and mitigation needs to remain the focus alongside any other affordability action.

“We will always have a view that building the community resilience and the property resilience sitting in communities is the best solution, and is the longer-term solution that will work,” she told Insurance News.

Advocacy is central to the history of the 115-yearold Royal Automobile Club of Queensland, a mutual company with about 1.8 million members, operating across roadside assistance, insurance, banking and travel services.

The insurance division offers policies including motor, compulsory third party, home and contents and pet, while its travel policies are underwritten by Tokio Marine & Nichido. Last financial year it achieved a milestone of $1 billion in gross written premium, while gross insurance claims paid totalled $878 million.

Ms Green joined RACQ in February 2018 as general manager insurance product and pricing and became Acting Chief Executive Insurance in July last year. In June she took up the permanent CEO role and last month was also appointed to the ICA board.

Prior to RACQ, Ms Green spent eight years at IAG, the last two as EGM customer & underwriting, and also held senior roles during a five-year stint at Suncorp and another at TIO in Darwin.

She entered insurance through the NRMA, after moving from New Zealand to Australia in 1989. That group later demutualised and separated into road services and insurance operations, with the latter becoming part of IAG.

RACQ, which has kept both motoring assistance and insurance under the same roof, provides services to more than 70% of Queensland households and has a high level of trust and strong connection with its membership, Ms Green says.

A KPMG customer experience survey of 114 local and global insurance brands across 11 sectors last year ranked RACQ Insurance second-highest. The insurance brands of NRMA and RACV also performed well in the survey, which involved more than 2500 Australian consumers.

The motoring brands may benefit from goodwill engendered by breakdown assistance, delivered in some states by distinctive small yellow trucks. RACQ’s website estimates the group has rescued more than 30 million motorists from the roadside over its history, but Ms Green notes the insurance business has built its own reputation.

“There is no doubt I would say that there is the ‘halo’ association that comes into play, but the delivery of insurance services is very well regarded as well and we see that through all our interactions. Net promoter scores are very strong.”

RACQ also offers a different model and culture compared to corporates, where customers and shareholders are distinct stakeholder groups and where shorter-term market reporting obligations may apply.

“The corporates have done an amazing job in lifting up that customer connectedness and how that drives through, but being in a mutual you don’t need to balance that divergence,” Ms Green says.

“The other thing that strikes me is the reporting cycle to the market. Being able to take a longer-term view over where it is you are wanting to get to, without that cycle coming through, is a different way of operating.”

But RACQ Insurance is just as affected by industry-wide implications from the Hayne royal commission into the financial services sector, with many resulting reforms set to take effect over the next 12 months following delays due to the coronavirus outbreak.

The deluge of legislative and regulatory change includes the introduction of unfair contract terms, product design and distribution obligations, new rules for add-on insurance sales and claims becoming a financial service.

Ms Green says a trend toward more expensive events and cost pressures reflects not just catastrophe factors but also the reform environment and community pressures, including the rise of “disaster chasers”.

“There are other drivers coming through around community expectations, and regulatory changes,” she says. “If you think about the unfair contract terms that is likely going to drive additional cost into the policies as that moves through.”

Concerns over “disaster chasers”, who enter regions after a catastrophe seeking to sign-up business, resurfaced after the extensive damage from the recent hailstorm. The event caused insurance industry losses to quickly surpass $300 million, according to ICA estimates, and RACQ Insurance received more than 5400 claims in a little over a week.

Insurers say disaster chasers encourage people to make property repairs that were never going to be covered by their policies, while reports of tow truck drivers trying to scam victims also circulated after the hailstorm.

RACQ Insurance last year reinstated a home policy exclusion regarding cosmetic damage to external coatings and roofs, making it clearer that damage needs to be caused by a specific event.

“We’re seeing more and more claims being prompted by disaster chasers that are not linked to damage caused by a significant weather event, or that the ‘damage’ is what we’d consider normal wear and tear,” Ms Green says.

“The alternative to continuing to provide cover as it stood prior to this change is significant increases in premiums adding further to affordability stress on our members.”

The issue has also been raised by consumer groups, which have called for greater oversight of the “claims advisers” under the new laws that will make claims handling a financial service.

Ms Green says RACQ has a strong consumer voice, as well as industry expertise, and is well-placed to work with governments on such issues as affordability pressures and community protection, and to highlight the important role insurance plays in in the continuing vibrancy of the state’s regions.

“The fact that something is insurable enables the finance to be brought in, enables businesses to be set up, enables homeowners to get into their own homes and live happy and productive lives,” she says.

“This is about sustainable communities, so how you enable development to occur in a sustainable way that is going to enable that community to continue to be robust into the future.”