The Insurance Council of Australia has pressed the case for a mitigation “reprioritisation”, arguing the Disaster Ready Fund represents a drop in the ocean of cash needed, as availability and affordability challenges escalate.

“If you’re of the view that the climate is our biggest existential challenge in the coming decades, we should have already spent about $30 billion on flood defences in this country, but we’re lucky to spend $200 million a year, and we’re not even spending that,” CEO Andrew Hall told the peak body’s annual conference last week.

Last year, ICA launched a push for a $30 billion flood defence fund, spread over a decade and split between the federal, NSW, Queensland and Victorian governments.

Mr Hall referenced the Snowy 2.0 hydro development when contrasting spending levels on renewable energy versus mitigation investments. Latest estimates put the Snowy project’s cost at $22 billion and potentially $25 billion, after an initial estimate of $2 billion.

“When I look at the money that is being wasted on the Snowy project, for example, and I think about the cost of protecting every community on the east coast of Australia, it would have been cheaper to put that money in building ... flood levees, buybacks, home strengthening, and have become a resilient nation,” Mr Hall said.

“At the end of the day, there is a reprioritisation that is desperately needed in this country to think about what a resilient future needs to look like.”

In 2022, the federal government committed to spending $1 billion across five years via the Disaster Ready Fund, with projects supported by state and territory contributions.

Round four this financial year will deliver up to $142.5 million in federal funding for disaster risk reduction initiatives.

ICA chair and Suncorp CEO Steve Johnston told the conference years of advocacy have put mitigation investment on the national agenda, and funding is starting to flow, but there is a shortage of transformational design-ready projects.

“There is a role for cyclone protection facilities etc,” he said. “They are necessary but incremental. We need to do the dial up on what is nation-building infrastructure.”

Mr Hall said insurers are dealing with the impacts of climate change and inflation, which is making it more expensive to rebuild after disasters, while car repair costs are also rising.

“All of that is reflected through premium, so an insurance premium is a lag indicator of the inflation that’s running through the economy,” he said.

ICA has joined a group of business groups pushing for productivity improvements, including through regulatory reform, as part of the solution.

Insurers last year estimated that complying with “overlapping and expanding” regulations has led to the industry shouldering compliance costs of up to $3.5 billion.

Australian Banking Association CEO Simon Birmingham told the conference that on the demand side, the central bank is raising interest rates to combat inflation, but productivity action is needed from the supply perspective.

“A lack of productivity has absolutely created an environment that adds to inflation, so the two have absolutely got to be tackled together,” he said.

Conference delegates heard artificial intelligence is delivering efficiencies but brings risks for companies and has possible repercussions for the way insurance operates.

Mr Johnston said AI is already helping insurers identify risk, assess damage faster and settle claims more efficiently, and has given staff more time to help customers.

“Customers may also turn to AI-driven businesses for advice, or even insurance-like products, outside the regulatory framework that applies to insurers,” he said. “These changes raise fundamental questions about how insurance operates and how customers are protected. This is something we must work through thoroughly with government and regulators.”

The industry and government are continuing to grapple with the trends around individualised risk-based pricing, and its natural disaster insurance affordability and availability impacts.

Assistant Treasurer and Financial Services Minister Daniel Mulino told the conference detailed consultations are continuing, with principles including that any action does not “totally remove price signals” and fits with resilience aims.

Government and industry data-sharing is critical in working out next steps, while there is a lot to learn from experiences internationally – as examined by recent delegations, he said.

“We also need to look at the pros and cons of different institutional settings overseas, and I think that’s where the discussion, in part, is now,” he said.

“And that’s a good thing that we’re down to that level of detail.”