How climate change is contributing to soaring insurance costs

Photo: Shutterstock
Photo: Shutterstock

Many regional Australians are facing significant insurance delays for damage caused to properties during Black Summer's devastating bushfires. Others did not have insurance at all. According to the Australian Bureau of Statistics, some 1.8 million households hold no home insurance whatsoever. Sadly, our analysis of climate change strongly indicates this figure will rise.

Our changing climate is making events like floods and bushfires worse, inevitably increasing insurance premiums. Many homes will become too expensive to insure or, like in the US, some insurers may refuse to cover these hazards at all.

Insurance cost impacts hit less wealthy Australians hardest. Our analysis shows the flood risk has already increased by 20 per cent in parts of NSW and Queensland due to climate change. Insurance premiums of $15,000 per year, about one quarter of Australia's median wage, are now becoming normal in such places.

Farmers in bushfire-prone areas say they are facing increasing premiums too. Our modelling shows that premiums will increase further for farms in bushfire zones, with some farmers placed in potentially untenable financial situations through no fault of their own. So what do we do?

I was one of the 150-plus experts and affected community advocates who contributed to the Australian Bushfire and Climate Plan, devised over the past two months at the Emergency Leaders for Climate Action-convened national summit. The plan outlines 165 recommendations to address the escalating severity and scale of bushfires.

We must act promptly and decisively to help families, farmers and also insurers. Insurance availability and affordability in bushfire-prone areas will depend on the whole of society investment we make now. There are three key ways to ensure this happens. First, we must massively improve our ability to predict and fight bad fire seasons by investing in on-ground and aerial firefighting capabilities.

Second, we must assist families and businesses to make properties as resilient as possible. These people are the victims, not the villains of climate change, so it's only fair that governments cover upgrade costs.

Finally, the first two actions will only work if we halt rising temperatures and deliver a low carbon economy quickly. We can keep bushfire risk manageable and insurance costs affordable. The alternative is to turn our back on bush communities and rural economies.

  • Dr Karl Mallon is an international climate risk analyst for governments, banks and the private sector based in Newcastle.
This story Property insurance becoming unaffordable first appeared on The Canberra Times.