'Uninsurable nation': half a million homes face insurance crunch, says report

Australia faces the dire prospect of becoming an “uninsurable nation”, with more than half a million homes, or one in 25 properties, forced to go without insurance cover in eight years’ time because of climate change, a new report warns ahead of the May 21 federal election.

The study released today by the Climate Council says insurers are raising premiums to cover the increased cost of claims and reinsurance as the threat of extreme weather events grows, with the risk set to worsen unless Canberra starts acting swiftly to phase out burning coal and other fossil fuels.

“Climate change is creating an insurability crisis in Australia due to worsening extreme weather and sky-rocketing insurance premiums,” the report, Uninsurable Nation: Australia’s Most Climate-Vulnerable Places, says.

The report says not only will insurance become increasingly unaffordable in large parts of the country, there is also the possibility that insurers may decide that offering policies in some high-risk areas is not viable, leading them to withdraw from offering their products.

“We have a number of places in Australia where people are not insuring their homes because of cost,” Climate Council CEO Amanda McKenzie told insuranceNEWS.com.au. “So that means that those homes are effectively uninsurable.”

She says the NSW/Queensland floods and 2019/20 Black Summer bushfires are a “massive red flag” for the country, given that they happened within two years of each other. The NSW/Queensland event is now Australia’s most costly flood disaster, with insured losses of $3.35 billion, the Insurance Council of Australia says today.

“Scientists have been saying for decades Australia is highly vulnerable to climate change risks and now we’re seeing it play out before our eyes,” Ms McKenzie said.

She says this coming federal election is “absolutely make or break time” for the country.

“The term of the next parliament is going to be absolutely critical in whether or not Australia is participating in protecting ourselves and preparing ourselves for extreme weather,” she said. “There has just been an absolute abject failure of policy at the federal government level in the last eight years and so the next parliament needs to rectify that.”

According to the Climate Council report, NSW and Queensland account for seven of the top 10 list of federal electorates that are most vulnerable to climate change-fuelled extreme weather events such as floods and bushfires.

Nicholls in Victoria heads the list, followed by Richmond (NSW), Maranoa (Queensland), Moncrieff (Queensland), Wright (Queensland), Brisbane (Queensland), Griffith (Queensland), Indi (Victoria), Page (NSW) and Hindmarsh (SA).

Some of the at-risk NSW and Queensland electorates include towns that bore the brunt of the February/March floods, including Lismore and Mullumbimby in NSW.

About 15% of properties (165,646), or around one in every seven properties in the top 10 list will be uninsurable this decade, the report says

By 2030, 40 federal electorates will have 4% of properties classified uninsurable with 18 of them, or 45%, located in Queensland.

The report says the rankings are based on the percentage of “high risk” properties in each federal electorate across Australia.

These properties have projected annual damage costs equivalent to 1% or more of the property replacement cost, and are referred to as uninsurable, the report says.

“Whilst policies might still be available, premiums are expected to become too expensive for people to afford,” it explains.

ICA has responded to the Climate Council report, with a spokesman saying that although there are some locations where there are affordability and availability concerns, there is no area of Australia that is uninsurable at present.

“Insurance prices risk, and that means that for those in flood-prone or cyclone-prone locations cover can be costly,” the spokesman said.

ICA CEO Andrew Hall told ABC News “no area is uninsurable but the question becomes what price do you pay [for] insurance when the risk is very high?”

“And in some cases we have seen, particularly in these most recent floods, homes that are flooded three times in 10 years and so the question has to be asked ‘when you’ve got homes that are in harm’s way and are often being damaged catastrophically like this, what do we need to do’,” he said.

Mr Hall says the country needs to look at adaptation measures and mitigation investments to improve resilience and existing building standards.

“We do have a problem in this country that we have got to simply address and that is more money has to go upfront to protect homes rather than in the clean-up,” Mr Hall said.

He says an “extreme outcome” may involve relocating homes, buying the land and turning it into recreational or environmental areas. But people have to be given options if they choose to stay where they are, he said.