Australia’s damaging climate is also harming your hip pocket when it comes to insurance premiums and ‘managed retreats’ of whole populations may need to be considered, according to a report.
Following this year’s devastating floods, a report by the Actuaries Institute (AI) found that one million Australian homes were facing insurance premiums of more than four weeks’ income and climate change would only increase cost pressures.
The reports come as some are questioning whether certain regions are even liveable as flooding continues to destroy some communities over and over again, with more bad weather predicted for spring.
The AI research claims that some vulnerable households are paying an average 7.4 weeks of their gross annual income on home insurance, while the Australia-wide average is 1.1 weeks.
Read: Can working from home void my insurance?
Those homes are more likely to be in Queensland, the Northern Territory and northern New South Wales, while the rest tend to be in capital cities. The report says the gap between vulnerable and other households will continue to widen due to climate change.
According to the paper, the average home insurance premium across Australia is $1534 while Australians living in parts of northern Queensland and northern WA pay the highest amounts for insurance coverage, with mean annual home insurance premiums over $3000.
Communities in the Northern Territory are mostly affected by cyclone risk, while inland NSW and southern Queensland have high exposure to flood risks.
Report co-author Sharanjit Paddam said increasing insurance costs would make it harder for vulnerable households to recover from natural disasters and prepare and pay for measures to reduce their future risk.
Read: New insurance pays out as soon as extreme weather hits
“Climate change will increase home insurance affordability pressure, but the impact will be far greater on vulnerable households – those already facing affordability pressures,” Mr Paddam said.
“These vulnerable households are more likely to be older, renting, in lower socio-economic areas and have less savings. By acting today, policymakers can begin to address home insurance premium affordability and the socioeconomic inequities of climate change.”
The report claimed that regions that suffered from “persistent severe weather events” may in some cases need to relocate their population and assets, especially if insurance premiums become unaffordable.
“Managed retreat was used in Grantham (west of Brisbane) in 2013 and is underway in New Zealand in some areas damaged by the Christchurch earthquake,” Mr Paddam said. “But this requires careful government planning, community consultation and education to ensure vulnerable households are not left behind.”
Read: How does Centrelink assess life insurance policies
The report also recommends:
- improved infrastructure (such as levees, floodways, and sea walls)
- managed retreat from risk-prone areas
- better land use and planning and changes to building codes and to reduce development in high-risk areas
- nature-based solutions for improving resilience
- options to subsidise insurance for low-income households to supplement the cyclone reinsurance pool
- improved data collection and availability on home insurance affordability as well as vulnerable assets, natural hazards and the impact of climate change
- replacement of State stamp duty and levies with more equitable and efficient sources of revenue
Do you think communities need to be relocated? Should the government pay? Why not share your opinion in the comments section below?
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