Fire and flood: How home insurance can help us adapt to climate change

Stewart Williams in Climate Spectator (Australia): Australia is a harsh and volatile environment, subject to extremes of fire and flood. We’ve just seen a particularly early start to the bushfire season, with over 60 fires burning and at least two homes destroyed in Sydney. These fires match predictions of increasingly long fire seasons, and trends towards higher temperatures and decreased rainfall.

Every natural disaster raises the issue of home insurance – who pays, and who doesn’t have it. But this discussion misses what’s really going on. Extreme weather is on the rise thanks to climate change. It’s one of the factors behind rises in insurance premiums, a cause for public concern. But instead of worrying about price hikes we should be reading the signs.

The latest natural disasters continue to affect home insurance premiums, which are again set to rise. Suncorp, which owns GIO and AAMI and is the biggest home insurer across the nation, has recently identified key factors for its ongoing price hikes. They include the unexpected high costs of rebuilding what are very large Australian homes, as well as a spate of extreme events including the catastrophic 2011 Queensland floods.

More frequent and more intense weather events are expected with climate change. Internationally the insurance industry’s big re-insurers anticipate having to recoup higher pay-outs by raising premiums. Insurance is about risk reduction as well as risk sharing. Insurance with its various levels of premium identifies and prices that risk. It can provide an incentive or disincentive for home-owners to change their behaviour, and live more safely in an Australian environment that is sometimes very dangerous.

So, rather than just wanting to resist and reject rising premiums we would do well to pay attention and read them carefully. Research funded through the National Climate Change Adaptation Research Facility has examined how planning, building and insuring might figure in our adaptation to more extreme weather events in the future....

The Black Saturday fire in Kilmore East, Victoria Australia, 2011, shot by Georgehobbs, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license