Cost-benefit of Retrofitting and Community Engagement with Mitigation [Report for Suncorp Group Limited]

Housing vulnerability is a large contributor towards high claims costs for Suncorp, and the subsequent premium affordability issues for consumers. Reducing this vulnerability will decrease the risk associated with severe wind events, which can then be reflected in pricing for consumers. In 2014, Suncorp commissioned the Cyclone Testing Station (CTS) at James Cook University to conduct a comprehensive study to enhance Suncorp’s understanding of the vulnerability of houses in North Queensland to natural hazards, particularly tropical cyclones and thunderstorms. The study involved the analysis of insurance claims for residential homes in North Queensland (NQ) after Cyclone Yasi. Key drivers of cyclone-induced losses were identified in the Phase I analysis. As a recent extension of that work, the current study (Phase II) builds on the Phase 1 by estimating the reduction in losses based on retrofit and mitigation solutions for the typical loss drivers. The cost-benefit analysis was conducted through collaboration between Suncorp, CTS and economic consultant Urbis. The primary objectives for the CTS Phase II report included the following: • Identify a sample-set of mitigation solutions • Estimate the benefits of each solution (i.e. reduced loss) for a range of wind speeds • Estimate the cost of each solution As Urbis conducted the economic modelling aspect of cost -benefit analysis, those results are not discussed herein. Instead, the methodologies used to develop the basis of the cost-benefit model are presented. In addition, a literature review of mitigation programs used internationally is presented from a consumer engagement perspective. The success/failures of these programs are identified (where possible) and applicability to North ern Australia is emphasized. Finally, conceptual frameworks for a mitigation program are presented, illustrating how the process of inspections, reporting, mitigation and interaction with insurers may work