Climate change is causing premiums to rise, forcing many people to reduce their cover or opt out of insurance altogether.
This report, commissioned by CHOICE, The Climate Council, Financial Rights Legal Centre, Financial Counselling Australia, Tenants’ Union of NSW, explores the role of the insurance market in responding to these complex issues. It is informed by a nationwide survey of people that have home insurance, as well as interviews with homeowners and people who rent in communities affected by extreme weather events. Read the report:
These problems aren’t going away. They’ll get worse before they can get better. And fixing them will require serious and sustained attention by governments and the insurance industry, to ensure that insurance can continue to play a role in assisting people to recover and rebuild after extreme weather events.
This morning CHOICE CEO @AlanKirkland and a coalition of organisations contributing to the report presented the findings at Parliament House in Canberra:
One thing appears a constant across a number of topics, that being companies in certain industries are not willing to entertain anything that might reduce their profits even though they might be at historically high levels or at least going very well.
That is of course one of their mandates, to maximise shareholder value and keep those dividends flowing. Capitalism at work.
I signed the petition. This is a serious issue. Our current insurance company will not remove the flood insurance they added this year, even though our home is not in a flood zone. This extra insurance doubled our permiums to $704 per month. We’re fortunate to be able to afford these increased payments for now, but we’re changing insurers next month to the only company I found who isn’t adding flood cover in their quote.
It is a complex problem, the major Insurers have carried heavy losses over recent years, even though they spread the risk through reinsurance.
Insurers do not have vast funds waiting to meet any disastrous event that comes along, they are in the business for profit, and by hook or crook they will c;law back their losses by increasing premiums and protect themselves by shedding high risk policies.
Perhaps it is time to create something akin to the New Zealand Earthquake and War Damage Fund, to cover natural disasters by having a Central Government Fund for such events. The NZ E& WD Fund is maintained by a surcharge on all insurance policies, so long as one is Insured then there is access to the fund if the Government deems the event eligible. The problem in Australia’s case would be that they are coming from behind, and with the frequency of Natural Disasters in Australia, there would be great difficulty in building up a fund of sufficiently viable size before the next natural disaster strikes.
In Australia, many Insurers claim they are cheaper, and the emphasis is on the lowest premium. Assuming Insurers all have similar loss ratios, then with high loss ratios ( Claims: Premium Income), the cheapest may be the most attractive until one comes to claim. I would suggest that a better way to assess Insurers is their track record on settling claims; after all the reason we should be insuring is to have an honest claim fairly met.
The sour taste of being short changed last much longer than the euphoria of a sharp price.
Agree it needs attention.
We live in a changing environment where uncertainty rules.
Without adequate transparency how can fairness be assured? I’ve added my support.
Whether a home owner/mortgagee or renter we all see the cost of insurance. Similar to the hip pocket for the added insurance costs on every business premise, private infrastructure and government owned asset.
We are just starting to see governments giving this some attention. There is a degree of foot dragging going on, I suspect because they don’t know what to do or how to do it.
I understand that people feel let down and abandoned when areas that never flooded, or didn’t flood badly or often, are now in a flood zone and they are under huge pressure whether they stay or go. Clearly they need help.
However there is a rising reaction that somehow insurers are to blame and ought to be compelled to provide cheap cover or that governments must throw unlimited cash at the problem regardless of whether the proposed solutions will actually work in the long run. That kind of magic pudding money is only going to cause more problems, waste, and if done badly enough let opportunists profit.
Individuals must still take responsibility. Extracting families from past collective mistakes at taxpayers’ expense is one thing, blind indemnity for future foolishness is another. Government money is still ‘our’ money and it still has to be spent wisely no matter how worthy the cause may seem to be.
A contrary example are the very expensive beach-front properties, for example on Sydney’s northern beaches, where the wealthy bought in despite serious beach erosion being recorded intermittently for the last 50-150 years (and probably happening for long before that) and now they want somebody to blame.
Best governments get their heads together and get on with it and start producing results quicker or we will see pressure for any kind of action regardless of merit. Ditherers will succumb and take short term actions to relieve electoral pressure.
Having gone above and beyond the Bushfire Attack Level - Flame Zone (BAL-FZ) building standard it is frustrating that the insurance companies are not able to take that into account.
Something about their standard tables, which I believe are industry-wide, doesn’t have that option.
It’s about time insurers considered the mitigation homeowners do to reduce their risk and reflect that in their insurance premiums.
The best advice I got for insurance, and it was on Choice Community, was to shop around - change every year because they want your business but they don’t try to keep it.
Councils keep approving building in areas known to be subject to flooding, beach erosion, etc. Of course, they stand to make lots of money from new developments in the way of stamp duties etc. Not to mention corrupt kickbacks and incentives from the developers. So they aren’t going to change this without a fight.
But until we fix this problem, we will always have people being financially trashed by natural disasters waiting to happen.
Looking to many recent flood events or major disasters one can wonder why properties were built where they were. Hindsight is a gift all politicians hope is rarely found, and foresight the promise we are often sold.
Note:
Stamp duties where they are levied do not go to the LGA. They are state or territory taxes.
If one has evidence of kickbacks or incentives from developers to LGA’s there are differing levels of accountability in each state and territory. Each has established commissions or similar for reporting crime and corruption.
It potentially happens in a lot of locations. Development is assessed against risks, not against a risk that will never eventuate. With flooding, many developments are assessed against probability of flooding. This can be against an AEP of 1%, 0.5% and such like. A development may be approved such that it is unlikely to be flooded by the design flood event, but doesn’t guarantee the development won’t flood.
Some developments are allowed in flood areas as long as the risks are ‘engineered out’. A recent article tries to explain why development in flood plains continues to occur:
Development to any remove flood risk is possible and would require a different approach to that which exists today. Development would occur on upper slopes of hills and engineered such flash flooding couldn’t occur.
With cyclones, the ability to develop outside such regions is impossible. This would require development being potentially prohibited in the northern half of Australia. Likewise with severe thunderstorms. Engineering and design can mitigate potential impacts of such events, vto reduce damage when such events occur.
No doubt it does as authorities scramble to update flood maps but that wasn’t the context. Since the observation was made alongside accusations of corruption I wanted to know about it happening now or the recent past.
I find it scary that if insurance becomes either too expensive or unobtainable for a property, then it becomes almost impossible to sell it as a potential buyer must have insurance in order to get a mortgage. Likewise, if you already have a mortgage, you need to keep that insurance for the life of the loan.
A book called “A River with a City Problem” illustrates very well some of the problems with insurance. The book recounts the major floods that have occurred in Brisbane and Ipswich since settlement. It is quite clear from this account that large areas of Brisbane and Ipswich are built on floodplains and they will be subject to devastating floods, climate change or not. Dams have not and will not save Brisbane. As such these developments are uninsurable. The floodplains should not have been developed, but there is too much money and political popularity to be had from these developments. There would be other areas of Australia which are subject to disastrous events which are entirely predictable and difficult to insure. It would be great if insurance was available in all situations at an affordable (whatever that is) price, but that is a bit like saying bookies should be compelled to provide 100 to 1 odds for all runners in the Melbourne Cup.
