BROUGHTON, Mrs Laura, Head, Platform Business, Commercial and Personal Injury Insurance, Suncorp Group Ltd MILLER, Mr Michael, Chief Executive, Commercial and Personal Injury Insurance, Suncorp Group Ltd Committee met at 10:58 ACTING CHAIR ( Mr Buchholz ): Welcome. I declare open this hearing of the Parliamentary Joint Committee on Corporations and Financial Services into small-business insurance. These are public proceedings being audiostreamed live via the parliament website, and a Hansard transcript is being made. I remind all witnesses that, in giving evidence to the committee, they are protected by parliamentary privilege. It's unlawful for anyone to threaten or disadvantage a witness on account of evidence being given to this committee. Any such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence. Witnesses also have a right to request to be heard in camera. If a witness objects to answering a question, they should state the ground upon which the objection is made, and the committee will determine whether it will insist on an answer, having regard to the ground upon which the claim is made. If the committee determines to insist on an answer, the witness may request that the answer be given in camera. I understand information on parliamentary privilege and the protection of witnesses giving evidence to a Senate committee has been provided to each of you. I now invite you to make a short opening statement. At the conclusion of any remarks, I will invite members of the committee to ask questions. Mr Miller : Thank you, Acting Chair and committee members, for the opportunity to appear today. Suncorp is a proud Queensland headquartered insurer with heritage going back to 1902. Through our brands of Vero, which is our dedicated business insurance brand, GIO and AAMI we ensure almost 200,000 small businesses across Australia. We're not the biggest player in the market, yet we offer national cover across a broad spectrum of industries, including tailored products such as market stall insurance and business at home for small and micro SMEs. Small businesses and not-for-profit organisations are under real pressure. Insurance costs have risen significantly since 2019. The average small-business premium has increased by more than 60 per cent. A policy that costs $2,000 in 2019 costs roughly $3,200 today. Our Vero SME Insurance Index, which is attached to our submission, gives us a clear and ongoing view of what small businesses face year in, year out—drawing more than 1,500 Australian business decision-makers each year. It shows six in 10 small businesses have seen premium increases in the past 12 months. At the same time, 47 per cent report declining revenue. I can certainly understand that those pressures together are hard to absorb. We believe that the commercial insurance market is competitive. There are nearly 400 providers offering general insurance in Australia, including more than 300 specialist underwriting agencies. Small business can buy directly from us or through brokers who help them navigate the market to find cover suited to their business. Small businesses have real choice, but choice alone does not solve affordability or availability. To understand those challenges, it's important to be clear about what is driving premium pressure. The main driver of premium pressure is the cost of claims, especially the expected future cost of claims. That reflects high repair costs, labour shortages, inflation, social inflation, claims frequency and the risk profile of a business or industry. In liability and longtail covers, it also reflects how complex a claim becomes, how long it takes to resolve and the resources needed to manage it. We are careful not to overstate any single cause, because the drivers are multifaceted. If we want to improve insurance affordability, government focus should be, in our view, on three areas. Firstly, mitigation. To bring insurance costs down we must reduce the underlying risk. When governments invest in levies, dams and flood diversion channels, they reduce physical risk for every business in that catchment—reduced premiums follow. The Roma flood levee is a clear example. It protects homes and livelihoods and puts downward pressure on insurance costs in that region. Secondly, taxes and charges. Depending on the state or territory, government taxes and charges are between 20 per cent and 40 per cent of the cost of the premium. On the $3,200 premium I mentioned, $715 is taxes and charges—up 63 per cent since 2019. In New South Wales, the emergency service levy collected $1.3 billion directly from insurance customers in 2024-25. On average, it adds $633 to a commercial building and contents policy. These taxes penalise businesses for protecting themselves. When costs rise, businesses reduce protection. Our survey shows 11 per cent avoided increasing their sums insured and eight per cent reduced their coverage altogether. They are underinsuring—not because they want to but because the total cost is too high. Removing inefficient state taxes and charges and replacing them with a fairer regime would deliver an immediate reduction in what small businesses pay. Thirdly, there's the regulatory burden. Small businesses do not have compliance departments. A cafe operator trying to open in Victoria must navigate 36 separate licensing requirements before serving a single coffee. The Australian Institute of Company Directors estimates Commonwealth regulatory compliance alone costs $160 billion a year. Every dollar spent navigating that load is a dollar not available for investment, risk management or insurance. We note the federal government is examining this issue, which we support. Our research shows eight in 10 small businesses have never conducted a formal risk analysis—not because they do not care about risk but because they are consumed by duplicated and overlapping regulation. Finally, the price of insurance is one of the clearest signals of risk in the economy. We should try not to mask that signal, but we can reduce the underlying risk, remove unnecessary taxes and charges and lighten the regulatory load that drains small businesses of the capacity to protect themselves. Suncorp is committed to working proactively with this committee and government at every level to help deliver that outcome. Thank you. Laura and I welcome your questions. ACTING CHAIR: Just for the record, it's poignant that we offer our appreciation for your organisation opening its doors this morning for us to have a bit of a look at your data centre and understand with a bit more clarity how your organisation captures its data. I want to start there. The intent of this committee is to understand, one way or the other, why we've seen such an astronomical increase far beyond CPI and far beyond any inflationary headline rate. We'll use since 2019 or, even further back, since 2010 as our starting point. I want to understand how insurance companies generally price premiums. I know you can only speak to how your business prices its premiums, but can you just give me an overview as to how you start layering up what your data sets look like before you head off to your underwriters and what that world looks like. Mr Miller : Absolutely. I'll start and then I'll hand to Laura to give you a bit more detail. I'll focus on the small-business insurance portfolio because I think that's the most relevant. As I said, we insure more than 200,000 businesses. There are two factors that go into pricing on the whole. One is occupation. We have 4,000 ANZSIC codes and we price down for one of those 4,000 ANZSIC codes. The second is location. Depending on where you are in Australia—the risk, the flood mapping and the like—there's a load for that. They're the two primary parts. Then what we do is we collect data—internal sources of data from our own actuaries on claims that we have seen and external sources of data such as flood mapping and the like. That gives you the overall frame. Then a lot of the small-business insurance is done automatically currently. So, from a broker, it'll go straight through processing to us. We will then use our algorithms and all that data to price it. Do you want to add anything in terms of coverage of the market that we have? Mrs Broughton : We at Suncorp have a very broad small-business portfolio. We have a broad geographical footprint. We also have a broad occupation footprint. Michael's mentioned that they are two of the key factors that we utilise in terms of risk. We find that having that breadth is key because it gives the portfolio more stability. On average, we quote for about 70 per cent to 75 per cent of every piece of business that's put to us. That's one of the higher quote rates in the marketplace. That would be three in every four bits of business that come to us we put a quote out for. As Michael mentioned, it is predominantly traded online, so our underwriters really only intervene if there's something unusual or nonstandard that, for example, a broker wants to talk to us about. So the broker would key in the risk information with a dedicated online question set, the algorithm will then respond and, as Michael mentioned, there's occupation, there's geography, there are the limits that the customer has requested and there are the sums insured that they've entered. There are up to 12 covers they can select under a business package insurance. They might have one cover or they might have all 12. We also take into account claims experience. That then all produces a quote that would go back predominantly to the broker. Most of our business is traded through brokers. That quote would then stipulate the price. We'd also include any terms we might put on that insurance—any restrictions on cover or any requirements we might have. Normally that relates to health and safety or ways of working that minimise risk. ACTING CHAIR: What percentage of your business or the industry would have exposure to business? Is it 80 per cent of your business? Is it half your business? Mr Miller : What we look after in commercial insurance gets exclusively commercial business. It's small business, large business and intermediate business. ACTING CHAIR: When I look at the Suncorp family— Mr Miller : Okay, fine. Our premium in the whole group is about $17 billion, and our commercial insurance premium is about $2.4 billion. ACTING CHAIR: What, as a percentage, would that be? Relatively low? Mr Miller : Twenty-five per cent or thereabouts. Sorry, 12 per cent—look at my maths! The key thing I would say around the commercial insurance industry is that it is fairly fragmented. We're No. 4 in terms of market share in Australia. These are our numbers—the highest market share sits with QBE, which has about 18 per cent, then CGU and Allianz, then Vero or Suncorp sitting at about nine per cent. You can see from there that it's quite fragmented. As I said before, there are 400 different insurance companies or underwriting agencies in Australia who specialise in that. Laura said we quote on 75 per cent—that means that we don't quote on the other 25 per cent. We can't quote on all professions, and the reason for that is as an underwriter you need to be a specialist. You need to have the data to back it up. It's very data driven. There are some areas of the economy which are better served by specialists in those areas, so there's no one insurance company that can write everything. If you start to underwrite businesses that you don't understand then, effectively, you don't have the data and you'll misprice it. That means that you'll have either too high a price or too low a price, and you'll give the wrong outcome to the customer. I think that's the important part in understanding which parts of the insurance industry operate in which areas. ACTING CHAIR: If we're looking at roughly 12 per cent of your business being that small-business portfolio, where's the rest of it? Where does the rest of the pie sit? Mr Miller : Of the $17 billion that Suncorp writes? ACTING CHAIR: Yes. Mr Miller : Our biggest business is in home and motor, which from a domestic point of view is the largest part of Suncorp. We also write large amounts of business in New Zealand. Suncorp is an Australian and New Zealand business, and that's where we underwrite and that's where we have our specialisation. ACTING CHAIR: Mums and dads that may be listening to this evidence today are sitting there pulling their hair out, saying, 'Ask them why my premiums have gone through the roof—ask them, ask them!' This is a great opportunity for insurers to share as to why mums and dads have seen continual increases in their insurances. I note your comment, Ms Broughton, about how we're now living in an environment where most people are under-insured. But why are insurance premiums going up? Mr Miller : We tried to address that in our submission. As I said in my opening comments, it's a multifaceted driver. The main driver in insurance costs going up is claims costs. Why are claims costs going up? Obviously, there is the weather—we're seeing an increasing incidence in weather activity across Australia over the last 10-15 years, if not longer, so the cost of rebuilding communities, the cost of reinsurance has increased. Secondly, there's inflation. There are pockets of the economy that don't have a surplus of capacity. Construction is one; there's heavy construction within Australia, in Victorian infrastructure, in New South Wales infrastructure, and also in Brisbane in terms of the Olympics coming up. To get qualified trades and get them on the ground it is costly, and anyone who has renovated a house would see that. Then there's general inflation—there's inflation in the economy. It's demand. So it's multifactored. In our submission our second recommendation is taxes and charges. Every time we add $10 to the price of a premium, that is escalated through and processed through the taxes and charges. That ranges from 20 per cent up to about 42 per cent, depending on which state you're in. ACTING CHAIR: Can we tease that out? You mentioned that there had been a 63 per cent increase in taxes. Can you tease out what those taxes are? Mr Miller : Sure. Each state does differ. We have three taxes that go onto insurance premiums. One is the emergency service levy, which is levied in New South Wales and Tasmania. That's between 22 and 25 per cent, and that's levied on top of the underlying premium. The second is GST, which is 10 per cent, which is a federal tax. ACTING CHAIR: Has that ever changed? Mr Miller : No, it has not. ACTING CHAIR: So GST was 10 per cent— Mr Miller : Correct. ACTING CHAIR: a couple of decades ago. Mr Miller : Well, whenever GST was put into the Australian economy. ACTING CHAIR: Yes. Mr Miller : Then stamp duty is the third one. Stamp duty, by state, is between eight and 10 per cent depending on your state. ACTING CHAIR: Has that ever changed—the stamp duty rate? Mr Miller : It has. The ACT abolished stamp duty. ACTING CHAIR: It's gone backwards. Mr Miller : It's levied now at zero. They've actually taxed in a different way. That gives you the effective tax rate, and they're layered. So you get your base premium, then you add 25 per cent if you're in New South Wales, you add 10 per cent for GST, and you add another nine per cent for stamp duty, which gives you the 42 per cent. All of those taxes and charges are crucial to the economy of Australia and crucial to the states in terms of maintaining it. We're not asking to abolish that revenue; we're saying it should be levied in a different way. There are a couple of examples I can bring out. Firstly, if you buy insurance, you pay all those; if you don't buy insurance, you don't. But I would argue that you still use the same infrastructure and the same emergency services, as anyone else. Secondly—this is from an equality point of view, and I think it comes to the heart of the commission—you'll see a lot of submissions from high-risk industries. Why are they high risk? It could be because of the geographical location, or it could be the occupation or what they do. If you're in a high-risk industry, your base premium is going to be much higher than in a low-risk industry. What happens then is those higher risk industries get those layered taxes on top, so it effectively exacerbates the impact of those taxes and charges on the areas of the economy where access to insurance is more difficult. Our view would be that, if you can find a more egalitarian way to levy those taxes and charges across the businesses in Australia or the ratepayers in Australia, I think you'll find that the impost of insurance is lessened, particularly in those outliers. ACTING CHAIR: I understand the emergency services situation in New South Wales, which is a statistical outlier. But can I put to the insurance bodies that another way of keeping those taxes low is: don't increase your premiums. You'll get exactly the same result. Mr Miller : Correct. ACTING CHAIR: I want to give Mr Moncrieff the opportunity to ask some questions; then I'll go to Senator Scarr. Mr MONCRIEFF: I want to acknowledge, as the acting chair said, the effort you've put in this morning to take us through the data that you've got. It was really insightful, so thank you for that. On the subject of data, you said in your submission that the small-business sector is more likely to have the informal, ad hoc approach to risk mitigation. Could you talk through whether you've got any approaches to gathering data on what risk mitigation small businesses have when they're taking out insurance with you. Mr Miller : Absolutely. I'll start at a high level, because I know data has been part of the inquiry's outcomes, and I'll go to Laura on the individual. In some parts of insurance, we have excellent data and the problem is getting to the data more than anything else. I can split it into three. If you're a small business in Australia, you'll buy workers compensation; you'll buy effective property and liability, which Laura can talk to; and you'll also buy compulsory third party. To illustrate some of the complexity there, if you're buying workers compensation in Australia, it's all levied by the states, and they're schemes. They effectively have a gazetted rate, and you can charge so much per occupation. That gazetted rate is set by each state. In Western Australia, the Northern Territory, Tasmania and the ACT, all of those schemes are underwritten by private enterprise. Suncorp participates in all those schemes. But, if you go to Queensland, New South Wales and Victoria, it's underwritten by government, so we don't have access to that data. As part of participating in those schemes, we give expansive data files in terms of claims, types of claims, psychological impacts and the like. So there's a richness of data at a state level. We get access to what we have, but we don't have access to all of the data for the industry. In compulsory third party a similar situation exists. In Queensland, New South Wales, South Australia and the ACT those schemes are run by government, but are also privately underwritten. Suncorp participates in those schemes. As part of that we give all of our data, in terms of claims, to authorities. In the other states—Victoria for example, and in Western Australia—it's underwritten by the government. They have all their data there and we don't have access to it. You can see there that, hopefully, in terms of having the federated states, there are different data sources. The key is: how do you get all that together in one place? I think that would give you a really good view of psychological claims, litigation costs and the like, rather than listening to people's views. The data's there. I'll give you a little bit of an idea of some of that. And the final one is APRA, which has the National Claims and Policies Database. We've gone through those submissions, trying to give you a bit of a snippet. With CTP in New South Wales, SIRA is the regulator there. They've had record high lodgements of 3,900 in the third quarter of 2025. The average number of payments per claim after four quarters is 20,000 in 2025. It was 10,000 in 2018. There's been a doubling in that six or seven years. The drivers they state are increasing payments, the psychological, along with imaging and physiotherapy and the removal of the 20-month damages waiting list. You can see some independent verification of that. It's fair to say that, if you're a large corporate and you do large-scale mitigation, we will absolutely recognise that in the premiums. We have about 30 risk engineers who will go out and survey large corporates and make sure they've got sprinkler systems adhering and the like. When it comes down to the smaller side of it, where the premiums, on average, are around $4,000, that is much more difficult. I'll give over to Laura in terms of question sets—how we try and address that. Mrs Broughton : As we've mentioned previously, most small-business insurance is transacted online with set question sets. We definitely include in those question sets questions about risk mitigation or aspects that might bring the price down. An easy and obvious one is building materials. Obviously, if your building is made of bricks with a tile roof, it's going to attract a lower price than if it's a wooden building. But we also ask questions about whether you've got sprinkler systems, fire alarms and burglar alarms et cetera. All of those aspects, if declared, definitely bring the price down because they help mitigate the risk. We also, as mentioned, do most of our commercial business through brokers. Brokers play a really valuable aspect of being the eyes and ears that we can't possibly be with the tens of thousands of small businesses that we insure. Brokers will often go and visit the small business. They'll go and look around the cafe, the pizza shop or the clothing shop. They'll be our eyes and ears in terms of not only getting a good assessment of what needs to be insured but also at times they'll give the customer advice as to how they can improve their risk. They'll also have a chat to some of our underwriters. If they think there's something there that's material about the risk that we should know, that, perhaps, our online question sets won't cater for, we always encourage our brokers to give us a call and we'll get our underwriters to have a conversation. There are a few different ways that we can get across the risk mitigation data. It definitely does vary from small businesses to the larger corporates that Michael's mentioned, where we can send a risk engineer of our own out, and they will conduct a full survey of the risk and then make recommendations. It really does vary between that gamut of commercial businesses where you've got the very small down one end, maybe only paying a few thousand dollars in premiums, up to the very large corporates. Mr MONCRIEFF: Is that something that you do? Do you communicate with the brokers, or through your direct insurance as well, around what you would like to see in terms of risk mitigation and what's best going to help them with risk mitigation, or is that something you rely on the broker's knowledge of the industry to communicate? Mrs Broughton : We don't give advice. We have to be particularly careful there. That's where the broker is much better placed to advise the customer. They play a really valuable role in being that intermediary between the insurer and the customer. Often they're much better placed to give that and give advice. Mr Miller : One thing we do is get our underwriters out to talk to the brokers and make sure they understand what we like in terms of risk and where we don't like risk, and what the things are that they can do with their clients to, basically, reduce their risk. It's more of an information session, in terms of: these are the things we're expecting. Then the brokers pick that up and give advice to their clients. Mr MONCRIEFF: How bespoke does that become for each class of business? Or is it more broad in that these are the risks small businesses are seeing? Mr Miller : It would depend on the industry. It has been talked about here before. Take tobacconists, for example. Tobacconists are a very tricky part of the economy to insure right now, and the reason is that there's illegal activity in that area. Interestingly, though, it's not only the tobacconist's shop itself that we have problems insuring. If you have shops adjacent to the tobacconist's, then, because there have been incidents of firebombings, that can also increase the risk of the shops around it. Part of our job is to make sure that the brokers understand that that risk is something that we are very worried about—not only for that one shop but perhaps for the shops or the strata around it, and it's an education session in terms of communicating. We try and communicate really broadly with our brokers, because they've got 400 different markets to deal with. They need to understand who likes which risk and where to go to; otherwise, it's a waste of their time. And they get quite good at that. As I said, there are a lot of good relationships between us and the brokers—ongoing training, in terms of our product set, what we're seeing and the trends. The brokers, equally, have good access to data, and they, at times, educate us about what they're seeing, and they can convince us to change our mind, at times, in terms of the underwriting risk. Mr MONCRIEFF: Thank you. ACTING CHAIR: Senator Scarr. Senator SCARR: Welcome to our witnesses from Suncorp—a great Queensland company with a wonderful Queensland based heritage. Thank you very much, Mr Miller and Mrs Broughton, to your staff for their excellent work in terms of organising that tour this morning of Suncorp's leading facilities. That was really very impressive. I first want to talk about this issue of state taxes and charges. Can you just walk me through them, using this example. Say my premium is $1,000 before we apply the taxes and charges. I want to understand how the compounding impact works. Assume the base is $1,000. Mr Miller : The first thing is that if you have ESL—which New South Wales and Tasmania do, of between 20 and 25 per cent—you apply that first. Senator SCARR: That's the emergency services levy; let's assume it's 25 per cent. That takes us up to $1,250. So that's the first compounding effect? Mr Miller : Correct. Senator SCARR: And the next one? Mr Miller : Then you add 10 per cent on the $1,250. Senator SCARR: So the GST is then applied, which is another $125? Mr Miller : Correct. And then you add stamp duty. I'll pick WA, because it's 10 per cent there—another 10 per cent. Senator SCARR: So that's applied— Mr Miller : on top of— Senator SCARR: to the post-GST— Mr Miller : The $1,250 plus the $125 together. Senator SCARR: So that's another $137.50? Mr Miller : Correct—which, depending on the state, will give you a cumulative impact of, in New South Wales, 42 per cent, down to the ACT, where it's 10 per cent cumulative impact. ACTING CHAIR: What's the stamp duty in Queensland? Mr Miller : Nine per cent. Senator SCARR: So there is a real inequity there, in terms of people who are—and you've described it in your submission, and I actually noted the phrase that came into my mind before I'd read the entirety of your submission, which was a 'tax on resilience'. Mr Miller : Yes. Senator SCARR: And you actually use that phrase in your submission. The more you're protecting your assets and being less of a burden upon the greater community to assist you if you get into trouble, the more you're taxed. The less you're providing risk mitigation for yourself and your family and your own business, the less you're taxed. That's the situation at the moment, is it? Mr Miller : Correct. Senator SCARR: And there's this compounding effect of, in a number of jurisdictions, the two different state or territory taxes and levies and then the GST? Mr Miller : Correct. Senator SCARR: So it's a tax on a tax? Mr Miller : Correct. I know that New South Wales have announced they're looking at a more equitable way to levy their ESL. They need that income stream, which we understand. It's just how you levy it. New South Wales are looking at it. If New South Wales solve that, then you'll be down to Tasmania, which still has an ESL. Senator SCARR: What do other jurisdictions do—say, New Zealand? Do you have any insight into New Zealand, as to whether or not they have a similar tax regime? I'm just interested to know what other jurisdictions are doing to try to address this. Feel free to take it on notice. Mr Miller : I can't answer that. Can you? Mrs Broughton : I don't know about New Zealand, no. The ACT was the main example that we'd looked at, where they've removed ESL and stamp duty, and— Senator SCARR: ACT has removed both stamp duty and ESL. There's just GST on the levy. But the ACT have a general land tax that they apply across the board. Presumably, that's one of the ways in which they raise the revenue so everyone contributes. Mr Miller : Correct. The ESL's been around since the 1880s, I think. A long time ago insurance companies paid for the fire brigade. Therefore, as part of the insurance premium, there was a levy in there, and, when it switched over to public ownership, the ESL came across. Senator SCARR: Mr Miller, you spoke about different businesses. Some businesses, because of their type or the occupations, have greater difficulty in accessing insurance. You gave the example of tobacconists, which is a pretty evocative example. We're seeing the risks there every day. Are there any businesses—putting aside the tobacconists—where Suncorp, over time, has withdrawn coverage? Are there any examples you can give us? Mr Miller : There are. There are quite a few. Do you want to give the field? Mrs Broughton : Yes, there are a number of industries, or segments of industries, that we don't participate in, purely because it rocks the portfolio too much. If we continue to participate in them, with the claims that we've seen, we'd end up having to put up costs for everyone to be able to meet the liabilities. Senator SCARR: Mrs Broughton, in particular, I'm interested in areas where you once provided insurance, over the last 10 years or 15 years, and you've withdrawn from the market. Mrs Broughton : Tobacco is the only one that we've done recently. We don't do it often, and we don't do it willingly. We try and pull all our other levers first, whether it's pricing levers, higher excesses or mitigating the levels of sums insured we're willing to write. We try and pull all our other levers first, because it's not good for the marketplace, as a whole, to have insurers moving in and out of segments frequently. We, and, I think, most other large insurers would say we don't do it easily or quickly. We try and look at every other option first before we move out. Even with tobacconists, we stopped writing new business last year, but we kept on our existing policies in the hope that maybe we could still participate in tobacconists by keeping our existing customers and offering renewals, but we just wouldn't write any more. Unfortunately, we're now a year on, and we're having to pull out of those too because it's just not sustainable. But, hopefully, that shows you and demonstrates a bit of just how much we try and do everything we can before we actually have to exit an industry. Mr Miller : I'll give you some examples of areas that we find difficult to underwrite. Islands off the coast of Australia are difficult for us to underwrite just because of the pure cost of rebuilding. There are the barges and the like going out there. Senator SCARR: In particular there, Mr Miller, we're talking about islands that might have tourism resorts? Mr Miller : That's correct. In North Queensland, absolutely. Senator SCARR: You won't provide coverage in that respect? Mr Miller : Correct. We did up until about 2016 and Cyclone Debbie. There was a lot of impact from that. Senator SCARR: Are you aware of whether or not anyone in the marketplace is offering? Obviously, it's a big issue for the tourism industry in Queensland. Are you aware as to whether or not any insurers are offering? Mr Miller : I'm not an expert, but I think Lloyd's will do some of the island business. We have looked at Tangalooma off here and offered terms there on the southern side. But the general problem, the issue for us, is trying to, firstly, predict the severity of storms that are coming through, and, secondly, it's the cost of rebuilding using barges, labour and getting it to that area. Tattooists, which I think came up before— Senator SCARR: Sorry, just before we move off islands, there are islands and 'islands'. Mr Miller : Correct. Senator SCARR: There's Hamilton Island—just picking an example out of my head—which is obviously a tourist destination. There are also some of the islands in Moreton Bay. Are you still insuring some of those islands in terms of North Stradbroke and destinations like that or islands like that? Mr Miller : I believe so, but I'm going to have to take that one on notice. But I can tell you that, for Hamilton Island, we don't. We did up to 2016 and then we stopped. Russell Island and the like in Moreton Bay are more on the home side more than the small-business side. I can get back to you with the answer. I just don't want to give you the wrong one. Senator SCARR: Sure. I'm just keen to know, especially wearing my Queensland hat, as you made that comment. We've spoken about islands. What's the next category? Mr Miller : That's high-risk occupations. I said the two points for us are (1) geography and (2) high-risk occupations. Tobacconists we've brought up, which we've recently changed. There are also outdoor activities—caravan parks with jumping pillows are where you get large liability claims. I think the tattooists came and gave a submission in the last. We don't underwrite tattooists because it's very specialised. It did have a history, but also we're more of a generalist. Where there's a piercing of the skin, we find that, from our point of view— Mrs Broughton : It's a three-point risk issue under liability. Senator SCARR: Are those markets you've withdrawn from, or have you simply never written a— Mr Miller : It's a combination of both. I think the islands, we've withdrawn from; tobacconists, we've withdrawn from. Going back to tattooists, that was 10 years ago, so I don't have that knowledge to hand. Senator SCARR: Caravan parks? Mr Miller : Yes, we used to—I think it's the liability side, coming out of caravan parks, that worries us: outdoor activities— Senator SCARR: Have you withdrawn from caravan parks, or— Mr Miller : I think there's a question set where we can underwrite it, but if they have activities that we think are high risk, then we wouldn't underwrite them. Senator SCARR: What's an example of those activities? Mr Miller : Jumping pillows, which my kids used to love. Senator SCARR: What's a jumping pillow? Mrs Broughton : It's a big blow-up thing. ACTING CHAIR: You're showing your age, mate. Senator SCARR: Sorry. Okay. Mr Miller : Take your kids to caravan parks; they are great. Mrs Broughton : Another example is swimming pools with slides. ACTING CHAIR: It's about half the size of this. Senator SCARR: Like a jumping castle thing? ACTING CHAIR: Yes. It's an elevated platform, like a jumping castle. Senator SCARR: Sounds fun. ACTING CHAIR: Yes, they love it. They kill themselves on it! Senator SCARR: So, again, coming back to the tourism industry, there are tourist activities, like parasailing and a whole list of things I've never done in my life, which tourists might be interested in doing. Have you withdrawn from those sorts of areas? Mrs Broughton : I'd say a lot of those types of risks are not suitable for a small-business package policy, which is what we've been talking about today. I think that normally caters for quite homogenous risks with quite a limited question set. There'd be a more complex risk that we might pass to our tailored underwriting team, because you need to have a real understanding of the risks involved, the activities et cetera. It's not that some of those aren't insurable; it's just that they're not suitable under small-business package insurance, which is quite a standard product. Senator SCARR: We talked about the successful mitigation arising from the construction of the Roma Flood Levee. When we're looking at that mitigation expenditure, including the application of government funds—investment into those mitigation assets—how important is it that there's close liaison with the insurance industry so that we can understand the potential impact on insurance levies? If I can put it another way, how do we go about ensuring that those mitigation assets don't just have a direct impact, in terms of stopping flooding or whatever it is, but also flow through to insurance premiums so that we're getting that benefit for the community? Mr Miller : Our No. 1 recommendation is mitigation—particularly in Queensland, where we have a large market share. We've seen cases like Roma, where it has been successful, and we've seen some cases where, arguably, it hasn't been successful. So No. 1 is that we're recommending mitigation. If mitigation is undertaken, there are two outcomes: (1) the risk is reduced, so you get fewer claims, and (2) the cost of insurance should reduce. I think that's absolutely the imperative. Senator SCARR: How do we achieve the second? Mr Miller : The ICA testified at the last submission. So what's happening now is that mitigation projects are being given to the ICA. The ICA then goes out to large insurers in Australia, puts it through their flood mapping and their modelling and then comes back with an outcome of what that is. I think it's really important that not just one insurer participates in that, because you need a market. If one insurer thinks that an area has been mitigated but those in the rest of the market don't, you have too much concentration in one area. I think what the ICA is doing with that process of getting the plans, running it through the insurers, looking at their modelling and saying that, on average, it'll achieve X reduction in that risk—that's the right process. As I said before, an outcome of mitigation that's undertaken where the insurance industry doesn't recognise it is not a good outcome for anyone involved. We need to encourage it. I think it's vital, particularly in Queensland but also more broadly across Australia. Senator SCARR: Thanks very much. ACTING CHAIR: Ms Jarrett, welcome. You have the call. Ms JARRETT: I want to pick up on a comment from Senator Scarr in relation to potentially uninsurable businesses or areas you've walked away from. You, Mrs Broughton, said that we're talking small-business packages here. Are they insurable under other packages? If you take your tattooists or your outdoor Australia or Scouts—we had the Scouts come in and tell us how difficult things were—are there different ways that they can be insured? Mrs Broughton : There are probably two other avenues they could take to be insured. There are what we call tailored lines, or complex underwriting. That's generally for bigger risks than small businesses. They're written, normally, manually by an underwriter who conducts a risk assessment. They might send out the risk engineer that we referenced earlier. It's a more manual and involved style of underwriting to really understand the risk that's presented. Then the insurer can assess whether they want to participate. That's an option for a large composite insurer like us. There are also a number of insurance agencies in the market that might have specialisms of one or more of those higher risk options. They'll seek to write a large number of the same type of risk and get some benefits from having the specialist knowledge, in terms of how to underwrite them, that perhaps an insurer like us that tries to write across the whole spectrum wouldn't have but they would have because that's all they focus on. Mr Miller : In my statement I said that it is competitive. There are 400 insurance markets in Australia. They'll be domiciled Australian insurance companies, overseas insurance companies and these specialist underwriting agencies, which are often backed by Lloyd's. A lot of specialist underwriting agencies will pick one area and understand that intimately and put it together as a package, working with industry. Industry will then have a series of standards. They can put all their claims data together, and they can package that up and say to Lloyd's, for example, 'We think this, if managed well, is an acceptable risk.' That's why it's so important that the industry is competitive. It's why it's so important that we do have many participants. From our point of view, one insurance company can't do everything, because what will happen is that you'll have too much concentration. As I said before, we can't be specialists in everything either. We're a large insurer specialising in Australia and New Zealand. We will quote 70 to 75 per cent, which means that there's 20-odd per cent of business that we will not underwrite. Ms JARRETT: How widely utilised, though, is that industry approach that you're talking about, and is that an avenue or a channel for better access to insurance? I appreciate it's for certain sectors, but is that something that is just floating there, or is the insurance industry looking at that and saying, 'Okay, we really need to be doing more in this space to give more high-risk areas access to insurance'? I know it's not necessarily your bailiwick, but you're in the market. Mr Miller : As I said, there are 4,000 ANZSIC codes. It's an industry standard. You rate by occupation because each occupation has a different risk—some are higher; some are lower. That's very standard, and, in all of our modelling, all of our data is collected by occupation code. Therefore, we can work out their technical price. The technical price is what we think the claims will be, based on the history and then on inflation going forward and also on what's happening in that industry. For that technical price, we'll then put one out. That's how it works in practice. Our view, in terms of addressing the affordability and availability, is back to our recommendations. The first is particularly around mitigation, which is location, geographic, or peril. We think that's No. 1. Secondly, with the taxes and charges, again, the high-risk industries have the highest premiums. They pay the most taxes and charges. If you can address that and make them more equivalent, it'll take the load off those high-risk industries. The final thing is that we are proud to be an Australian company. We do want to grow. If we see pockets that it makes sense for us to be in, we're always looking for them. But it's a matter of getting the data, being presented with that and making sure we understand what we're doing. Ms JARRETT: You said that 12 per cent of your portfolio is SMEs, correct? Did I hear that? Mr Miller : Business. Mrs Broughton : That 12 per cent is commercial as a whole. SMEs are a part of that. Ms JARRETT: Okay, commercial as a whole. Help me understand. In the last five years, by what percentage are claims increasing? I read somewhere not that long ago—I think it was in the Vero index— Mr Miller : That was ours. Ms JARRETT: Was that yours? It said that a lot of the businesses surveyed in that survey actually hadn't put in a claim in the last five years. Mr Miller : Yes. Ms JARRETT: If there are no claims going in, how can the cost be going up? Mr Miller : Correct. Ms JARRETT: I'm just asking the question. Mr Miller : No, absolutely. I guess that's the concept of insurance. You have a portfolio of like risks. Some will have a claim and some will not. Then, as a portfolio, they share, effectively, the cost of that. In our calculations in our submission, we've got a 60 per cent increase in insurance premiums, on average, since 2019. Ms JARRETT: Yes, I saw that. Mr Miller : And, as I said before, it depends on the occupation and it depends on the location, but it's also the general inflation in the economy. So our job, in many ways, is to make people right in terms of property or in terms of damages and, with wage inflation, in terms of personal injury. There's the cost of materials. There's the cost of labour. All of that then floats into it. So, in many ways, the insurance premiums just mirror what's going on in the general economy in terms of our pricing. Ms JARRETT: If we look at a five-year or 10-year period—say, five years prior—with no new claims lodged, therefore any of those price increases that you're talking about are coming from claims previously that obviously have to be carried across. I understand how it works. But then going forward, for the next five years, are you still going to see zero claims? Mr Miller : For? Ms JARRETT: For growth. Mr Miller : From a portfolio point of view, we always get claims. Ms JARRETT: Okay. Mr Miller : But as an individual, as a homeowner, you may not have a claim for 20 years, which is fantastic, but you're still going to get price increases, because your neighbour or your neighbour's neighbour has made the claims. So we look at it as a pool and look at the cost of that pool, and then we actually put it in. That's a transfer of risk to us. We have to look at it from a portfolio point of view because, if we get too granular, some individuals, through no fault of their own, will get large increases and some individuals, by happenstance or good luck, will get no increases because they haven't had a claim. That's just the general principle of how that will work. Ms JARRETT: I have one last question: do you have a point of view on this $20 million public liability insurance? A lot of the not-for-profits or volunteer groups are saying that this is very costly for them, and it seems to be becoming an industry standard to have that level of liability cover. Mrs Broughton : Yes. Ms JARRETT: Who's driving that? Is it the insurers driving that just generally? Mrs Broughton : In the public liability space, we offer three limits that customers can buy: we offer $5 million, $10 million and $20 million. If we look at our direct book and we see what people purchase, it's split really a third, a third and a third in terms of what people are opting to take. If we look into our intermediated book with brokers, where we typically see slightly larger, more complex SMEs, it's more like 60 per cent at that highest level and about 30 per cent at the $10 million, and then just a handful take the $5 million. So we do see quite a distribution of people deciding to purchase the different limits. We certainly don't make any recommendation as to what limit people buy. We allow them to buy all three, and it's really up to them as to what they choose to purchase. Those recommendations of $20 million seem to come from companies or organisations that small businesses are working with, and they've deemed that the minimum level that they'll accept, but it's certainly not driven by us. We offer three levels. Ms JARRETT: You just said, though, that where there are more brokers you're getting more towards the higher end. Do they get the commission for that? Mrs Broughton : Brokers earn a commission as a percentage on premium, but brokers ultimately represent the customer and provide their advice to represent the customer's needs. So they would judge that the customer would need that level. As businesses get more complex and get larger, it would be natural that you'd see them needing the higher limit more often. Mr Miller : Correct. ACTING CHAIR: I'm conscious of time. Thank you for your time here today giving evidence. I know Senator Scarr asked a couple of questions that you've taken on notice. Could you get the responses to those back to the secretariat by Wednesday 15 July. Thank you for appearing, and thank you for your hospitality this morning..