Mitigate disasters to cut insurance costs, says Liberal senator

Mitigate disasters to cut insurance costs, says Liberal senator | Insurance Business

Mitigate disasters to cut insurance costs, says Liberal senator
Extreme weather events are inflicting a massive financial toll on Australians, with storms causing the most frequent insured losses, floods the most expensive, and bushfires the most deaths.

Australian taxpayers are paying an annual cost of $6.3 billion due to natural disasters, a figure that is expected to quadruple to $23 billion in just 30 years, according to the Australian Business Roundtable on Disaster Resilience and Safer Communities.

To significantly reverse losses in high-risk areas, such as in NSW and Queensland which have seen the greatest accumulation of insured losses from natural disasters, a Liberal senator said there should be greater financial emphasis on mitigation and resilience.

“The rising cost of natural disasters is directly correlated to the increased exposure and vulnerabilities of communities to these extreme weather events,” Dean Smith said, in an Australian Financial Review report, especially as more people settle in disaster prone areas, such as coastal areas and urban fringes.

It was due to this changing pattern of urban development, he said, that natural hazards escalate into a natural disaster, less because of the natural severity of the weather event but because of the changing physical conditions of people’s habitation and work.

The CSIRO has made an alarming prediction on this particular trend, saying that based on current development patterns the number of residential buildings in south-east Queensland
“affected by a one in a 100-year storm tide inundation event nearly doubles in 2030 compared with today,” AFR reported.

“To date, the response of state and federal governments has been to focus on post-disaster relief and reconstruction, rather than on pre-disaster preparation through resilience and mitigation,” Smith said.

In a 2014 report on Natural Disaster Funding Arrangements, it was found that mitigation spending was only 3% of the amount spent on post-disaster efforts in recent years.

Smith said there are cases in Australia which emphasise the financial benefits of mitigation - not only in reducing premium prices but also in delivering significant financial and physical protection to Australians. The flood mitigation investments in Roma and St George, Queensland, for example, are expected to yield a net benefit of $64.7 million and $25.7 million respectively over the next 50 years, and have prompted insurance premiums to be reduced by amounts exceeding 50% and in some cases 90%.

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In Launceston, the $58 million flood levee, tagged as a “game changer” in reducing the impact of the June 2016 flood, led to a massive drop in insurance premiums for many homeowners within the levee protected area. The premium to insure a home for an insured sum of $400,000 outside the protected area is $3,689, as compared to $629 for a similar home within the protected area, it was reported.

“Proper mitigation not only improves the affordability of insurance in high-risk areas but is the key to ensuring disaster costs are not disproportionately borne by taxpayers,” Smith concluded.

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