'We all pay': ICA outlines true cost of catastrophes

Every Australian household paid an average of $1532 in the last financial year to cover the cost of extreme weather events, according to two significant reports released by the Insurance Council of Australia (ICA).

This sum includes government expenses paid for through taxes, insurance costs, uninsured damage, and increased prices due to supply chain shortages.

The Cost of Extreme Weather report, commissioned from think tank the McKell Institute, says this figure is set to rise to more than $2500 a year by 2050.

The ICA also released its second Insurance Catastrophe Resilience Report.

McKell Institute CEO Michael Buckland says the direct costs from extreme weather events are estimated to grow by more than 5% above inflation and reach more than $35 billion by 2050.

“The 2022 floods along Australia’s East Coast not only impacted millions of people and cost more than $5 billion in insurance damages, but they also showed that even individuals who were not directly impacted by the event bear the economic and social cost,” he said.

“Every Australian pays for natural disasters through the rising cost of produce or shouldering the tax bill for recovery.

“In just under three decades Australian households will be paying more every year for the direct costs of extreme weather events and the wider economic costs will be even greater.

“This report shows that we must act now to curb this growing impost.”

ICA CEO Andrew Hall says the reports are “stark reminders” of the urgent need to invest in strengthening communities against worsening extreme weather.

“Over the last decade the percentage of all spending in resilience and mitigation has declined in comparison to the money spent on recovery and clean-up, and this is again a reminder why we need the change in policy thinking,” he said.

“Progress is being made by the new Federal Government, who [last week] introduced legislation to invest $200 million a year in resilience measures through its Disaster Ready Fund.

“But states and territories must also do their bit and match this funding to protect communities from worsening extreme weather.

“They should also act now to reform state taxes on insurance products as an immediate measure to make insurance more affordable and lift the level of cover against extreme weather events.”

See Analysis.