According to the Insurance Council of Australia, thousands of properties are at risk of being destroyed by bushfires each year. The devastating Black Summer bushfires of 2019 & 2020 alone destroyed more than 3,000 homes. Helping homeowners make sure they have insurance that takes into account their level of bushfire risk is vital for ensuring they’ll be able to rebuild and recover should the worst happen.
To help with this, CoreLogic has launched a new BAL module for Cordell Sum Sure. A significant upgrade, the new module provides improved accuracy for property rebuild estimates in bushfire-prone areas.
The BAL module factors in the additional costs of fire protection and mitigation strategies required by the Construction Code AS3959 – costs which are directly related to the Bushfire Attack Level rating of an individual property.
Matthew Walker, CoreLogic’s Head of Insurance Solutions, says the add-on module will help customers in areas with higher bushfire risk make more informed decisions when selecting their level of cover.
“We want customers to arrive at the rebuild cost that is as robust as possible. CoreLogic is helping them do this in a meaningful way."
Greater accuracy of assessments
BAL ratings support a more informed assessment of bushfire risk for a property. Several factors are involved in determining BAL – including vegetation, direction and degree of slope, and the local fire danger index.
For example, let's say a property has a BAL rating of 19. In this case the construction code stipulates the use of non-combustible materials, door and window shutters or screens, ember guards on all openings, and metal water and gas supply lines.
Failure to take these building regulations into account when doing assessments could result in significant discrepancies between estimated and actual rebuild costs to local standards. Our modelling shows this can be as high as $300,000 – and possibly more in some cases.
CoreLogic has calculated a BAL rating for each individual property in Australia, and adjusted the cost algorithm to account for these requirements. This process helps ensure an estimation that factors in building regulations is used to protect insurers and their customers.
The bushfire risk assessments are being carried out in bulk, and if an insurer chooses to add the BAL module to their existing service they will be built into their Cordell Sum Sure estimates – making it quicker and easier for homeowners and insurers to assess a property’s risk and generate an appropriate sum insured value.
Rising building costs
Building costs have been rising steadily, with the Q2 2022 CoreLogic Construction Cost Index showing a national increase of 10.0% over the 12 months to June 2022– the highest annual growth rate on record outside of the introduction of the GST.
The reasons behind the increase include a surge in new builds, supply chain disruptions, and a shortage of materials.
Matthew explains the cost of materials alone has recently gone up 10-12%, outstripping inflation.
“When combined with the shortage of materials and labour, this will push up the costs of building and insurance.
"When calculating rebuild estimates, these increased costs must be accounted for to ensure adequate risk management and insurance cover. This especially applies to properties with a BAL rating that require the use of specific materials and methods in rebuilding."
Better management of insurance portfolios
The BAL module will help insurance companies to manage the risk on their books and price their products appropriately, helping to manage insurance coverage for their customers in bushfire prone areas.
Homeowners use the calculator in the same way they currently do - by entering their address and updated property details to get a rebuild estimate report that takes their BAL into account.
"We know underinsurance is a major problem in Australia, often driven by customers 'guesstimating' rebuild costs, not accounting for home upgrades or trying to keep the cost of premiums down," Matthew says.
"Greater accuracy in estimating risk and the cost of rebuilding will allow homeowners to make highly-informed choices about the levels of risk and insurance they are willing to take on."
Comprehensive data and continuous improvement
Cordell Sum Sure uses CoreLogic’s comprehensive property data to quickly provide an estimate of the cost to rebuild a property, which can be used to inform a sum insured.
Development of the BAL module required rigorous calculations, leveraging our long-term expertise in construction costs, risk management and insurance solutions, and building on our existing hazard profiling for individual properties. It's part of our commitment to continuous improvement for Cordell Sum Sure, to help insurers minimise risk and engage with their customers regarding adequate coverage.
Want to know more? Contact your CoreLogic Account Manager, or request a call back below.
CoreLogic Australia