When record flood events hit south-east Queensland and Northern New South Wales in the first quarter of 2022 the Australian insurance industry was already dealing with est. 85,953 open insurance claims, driven by six declared insurance events that occurred in 2021 [Insurance Council of Australia, November 2023].
In September 2022 the Insurance Council of Australia observed:
The south-east Queensland and northern New South Wales flood has so far cost the insurance industry $5.28 billion – almost triple the cost of the 2011 Brisbane floods and now the second most costly extreme weather event in Australia’s history.
At that point in time the Insurance Council was asserting that:
At present no region in Australia is uninsurable, however worsening extreme weather events are driving up premiums in parts of the country most exposed to extreme weather risk and rendering insurance unaffordable for some.
A neat piece of hair splitting made despite the fact that three months before, the Climate Council had issued a media release highlighting an analysis indicating that:
One in 25 Australian properties will be effectively uninsurable by 2030, due to rising risks of extreme weather and climate change.
An analysis which, in breaking the Northern Rivers region into the two federal electorates which encompass its land mass, predicted that in the Richmond electorate 20% or 22,274 properties were at "high risk" while up to 11% or 11,691 properties were at "high risk" in the Page electorate.
In Yamba alone, in the Clarence Valley section of the Page electorate, in a worst case scenario 5,237 properties are likely to become progressively uninsurable across a 70 year span commencing in 2030. A number that would contain all residential dwellings and other buildings in present day Yamba.
While the Lismore City section of the Richmond electorate, in a worst case scenario is likely to see 5,711 properties become uninsurable over the same time period.
In the two years since the Insurance Council's statement the word "uninsurable" has continued to crop up in discussions concerning flood prone land and existing homes that had been built on such land - and as a region we have continued to twist this way and that trying to comes to terms with a grim reality.
The National Insurance Brokers Association in its October 2023 short submission to the federal parliamentary Inquiry into insurers’ responses to 2022 major floods claims was frank it its assessment of the insurance situation for so many households:
Increasing insurance losses due to more frequent natural disasters, as well as changes to actuarial and underwriting models and underlying risk profiles, have resulted in significant increases in insurance premiums in many parts of the country.....
The paradox of insurance is that those who are most impacted by natural perils, i.e. low socioeconomic households, are least likely to be able to afford to protect themselves from the effects of such events. Uninsurability has the potential to exacerbate existing inequalities by trapping vulnerable populations in high-risk areas and exposing them to greater social harm. Low socioeconomic households are less likely to be able to recover from natural disasters due to lower household incomes and less secure work. Low socioeconomic households are also more likely to be engaged in part-time or casual work. This demonstrates that the impacts of uninsurability will disproportionately affect those who are least able to protect themselves against these impacts.
The issue continues to be problematic for the NSW Northern Rivers region.......
Echo, 23 August 2024:
Insurance isn’t something that you necessarily have front of your mind most of the time but when you lose your house in a flood it suddenly takes on a whole new importance.
Insurance means that you have the opportunity to rebuild, to try to put your life back together – but flood insurance is not available to everyone, particularly those in flood risk areas and leaves them extremely vulnerable following natural disasters such as the 2022 flood.
Flood rubbish around You Are Here sign in Lismore, 7 March 2022. Photo David Lowe.
For a town like Lismore, and many others around the world, this lack of insurance means that they are unable to effectively rebuild following floods. The Inquiry into insurers’ responses to 2022 major floods claims has highlighted that ‘areas with low insurance cover have significantly worse post-disaster outcomes that negatively impact households, local businesses, and local economies’.
This Inquiry was commissioned by the then NRRC for the Community Leaders Forum that was led by Lismore MP Janelle Saffin, NSW Parliamentary Secretary for Disaster Recovery and made up of State MPs Tamara Smith (Ballina), Geoff Provest (Tweed), and Richie Williamson (Clarence); Federal Member for Page Kevin Hogan; and mayors Cr Steve Krieg (Lismore City), Cr Chris Cherry (Tweed Shire), Cr Kylie Webster (Kyogle), Cr Michael Lyon (Byron Shire), Cr Sharon Cadwallader (Ballina Shire), Cr Robert Mustow (Richmond Valley) and Cr Peter Johnstone (Clarence Valley).
‘I thank its authors, academics from the University of Queensland’s Business School – Professor Paula Jarzabkowski, Dr Katie Meissner and Dr Matthew Mason – who are very learned in this area,’ Ms Saffin said.
‘They have made a case study of Lismore that can be extrapolated across the Northern Rivers region, New South Wales, and indeed, other places in Australia....
...Whatever is done, government needs to be very involved in the response, and we must require mitigation and adaptation to be in the mix,’ she said.
Ms Saffin has made a submission, on behalf of the Community Leaders Forum to the Federal inquiry into insurers’ responses to the 2022 major floods claims utilising this report as the basis for that submission.
‘This analysis shows that the current problem of insurability will remain a wicked problem for Lismore, with no foreseeable reduction in the pricing of private sector flood insurance,’ states the report.
‘Without access to affordable insurance:
- Lismore property owners will struggle to attain or maintain mortgages;
- Lismore landlords will struggle to provide a robust residential or commercial rental market;
- Lismore businesses are likely to have their credit and growth compromised;
- The commercial attractiveness of Lismore is likely to suffer.’
Mitigation, relocation and adaptation key
Ms Saffin noted that the submission found that there is no single, per-existing solution for the complex problem of uninsurability in Lismore.
It makes four recommendations about the potential of a new insurance ecosystem for Lismore:
1. A national risk pool is a tested solution that, when well-designed, could support affordable insurance in Lismore for residents and small businesses providing it is accompanied by a medium and long-term program of risk reduction including relocation.
2. Small parametric products, which can be spent flexibly by policyholders, have potential to provide economic benefit to Lismore business owners supporting them with rapid response to business interruptions, particularly from small-scale events.
3. Parts of Lismore fall within the uninsurable zone and could be considered for insurance innovations to support planned migration and provide insurance cover during any transitionary period.
4. Lismore residents and business owners will benefit from a sustained program of embedding risk management capabilities throughout the community to support them in reducing their risk and increasing their financial ability to respond to hazards.
