Despite the slow fall in inflation, Australian households are paying through the nose for their insurance. Indeed, rising insurance premiums have been a notable contributor to Australia’s cost-of-living crisis. They have also placed upward pressure on CPI inflation.
The Climate Council says that Australians are paying $30 billion more on insurance than they were a decade ago, while premiums have risen at more than twice the average rate of inflation over that time.
The Insurance Council of Australia stated in a recent report that 225,000 Australian homes face a 2% to 5% chance of flooding each year, but only 23% of those homes have flood coverage, compared to 60% across the country.
The Actuaries Institute also estimates that 12% of households are facing insurance affordability stress, which is defined as when home insurance premiums exceed four week’s income.
Climate dynamics is part of the problem. One study found that extreme and potentially dangerous rapid rain bursts (sub-hourly heavy rainfall) over Greater Sydney have intensified by at least 40% over the past two decades (1997 to 2018). But I want to focus on something more immediate. Planning zoning.
The Insurance Council says it is an example of an outdated planning process. “Zombie DAs” can leave owners who are directly affected priced out of insurance and drive up premiums more broadly. The extent of zombie DAs is unknown, although a NSW parliamentary inquiry heard coastal NSW alone has hundreds of them.
My point is, there is line of sight between insurance costs blowing out, bad planning and zoning, the desire to build in unsuitable places, and rising flood risks. A classic cocktail, were commercial interests over-ride doing the right thing.
The consequences are more households facing flooding risks, many of who are uninsured, because the costs are so high, which means that in the event of a major flood, Governments, who created the problem in the first place due to poor zoning decisions, will need to recover costs of remediation from taxpayers. Or in other words, we all pay because of the bad planning, making insurance costs higher, inflation higher and leading to higher interest rates. Join the dots people, join the dots…
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