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

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…

Yesterday’s early start to the bushfire season threatened homes in Sydney’s suburbs. AAP Image/Dean Lewins

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.

Of those people living in very big houses with lots of material belongings and located in high risk areas such as fire-prone bushland or waterside settings, some will accept the higher premiums to retain a particular lifestyle. For most Australians insurance allows a home to be replaced after a disaster – often on a “like-for-like” basis – and is what allows life to carry on as usual.

Alternatively, we could decide as individuals and as communities to try and change how we live. Insurance could guide improvements in where housing is built, its size and design, and the use of better materials. New dwellings could be small and compact, built to suit the environment, situated away from floodplains and north-facing slopes in flammable bushland, and using more resistant or cheap and easily-replaced materials.

The availability and cost of insurance should become one of the accepted signals to prospective home-buyers indicating whether or not existing housing stock meets the requirements for this more resilient future. Where insurers fear to tread, so too local governments, planners, developers and builders as well as home-buyers should be wary of entering. Communities in high-risk and insurable areas might in turn be encouraged to retreat to wholly new locations.

But what about people who can’t afford insurance or to move to safer ground? Research funded by the Australian Housing and Urban Research Institute shows that people in social housing are some of society’s most marginalised and therefore especially vulnerable to natural disasters. Tenants of public housing affected by cyclones, bushfires and floods rarely hold insurance.

Poor housing in disaster-prone areas will remain home to the least well-off members of society. Perhaps the notion of “climate change ghettoes” will be added to the litany of forms that currently identify places of disadvantage in Australia.

The government continues to play a key role as the insurer of last resort, particularly for vulnerable and marginalised households. But proponents of insurance revile such interventions. Insurance proponents say these measures distort the market mechanism that prices disasters, contributing to “moral hazard”, or poor choices given the possible turn to a government handout.

It is hard to deny people in crisis access to assistance from governments and communities. However the use of scarce resources to reinstate households and townships unthinkingly back in the line of fire squanders any opportunity to learn from these events.

The solution may be critical relationships that bring together the different players involved in insurance, housing provision, climate adaptation and disaster management.

They will be required to work together with various stakeholders in bravely and innovatively deciding how and where we redesign and build more resilient Australian communities. The plan to relocate homes in the ravaged township of Grantham in the Lockyer Valley is an Australian first and exemplary of how such initiatives might work through land-swaps.

There will be an uncomfortable period of transition; communities in urban areas have an inertia to them that means change is slow. Even as new safe havens pop up, they will not be available to everyone immediately. Weathering our climate change future will require a response that involves all Australians.

Join the conversation

12 Comments sorted by

  1. David Arthur

    resistance gnome

    Thanks Dr Williams. You write: "Alternatively, we could decide as individuals and as communities to try and change how we live."

    Well, those of us who are underinsured will change how we live as and when we are burnt out and have to adjust our lifestyles to our more straitened circumstances.

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    1. Michael Shand

      Software Tester

      In reply to David Arthur

      I am just dreading the crying that will come from people that have both ignored the science and failed to prepare

      You know, disaster strikes, they cry about how everything they worked for has been destroyed and they need tax payer assistance

      When it happens I wish we would be able to say no but unfortunately us humans have this empathy and compassion thing that gets in the way

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    2. Sebastian Poeckes

      Retired

      In reply to David Arthur

      Even more than forty years ago the Forests Commission Victoria offered a range of publications which discussed strategies for placing housing more safely in fire prone landscapes. There were also publications on appropriate plantings and suggestions for architectural features of houses to make them less vulnerable to fire.

      Roll on four decades and in the midst of Black Saturday, what did we see? Houses built of wholly unsuitable materials to fire-vulnerable designs with nearby plantings of eucalypts…

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    3. Michael Shand

      Software Tester

      In reply to Sebastian Poeckes

      Those folks in Belgrave, Upwey, etc sure do love to collect sticks from the yard and set them a light tho

      they do this instead of composting as they have been convinced that they are "Burning Off" and doing something good for the environment.

      My Aunt lives in upwey and has Eculypts right outside the house with branches leaning over the roof line - but still lights a bon fire every year as part of "Burn Off" season, if you ask them they will tell you all about aboriginal landcare and burn off practices and how they are helping the environment with their suburban backyard bon fire

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    4. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      We changed the way we live a long time ago....... and haven't insured for twenty years!

      I'm a firm believer in taking responsibility for everything I do. So I built out of reach of floods, to standards that are well above the cyclone rating, and designed the surroundings of our place such that we don't have to worry about bushfires.

      In the kitchen, we have both a fire extinguisher and a fire blanket. Most people wouldn't do that because 'they don't look nice'.

      Furthermore, because our place doesn't need heating, we don't even own a heater, the most common source of fires in domestic dwellings.

      And when we move to Tasmania, whose fire season last year made me sit up and think, we'll build this... http://damnthematrix.wordpress.com/2013/04/05/fantasising-about-our-next-house/

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  2. Marc Hendrickx

    Geologist: The Con is a bad Monty Python sketch, for climate sense see: http://www.thegwpf.org/

    Early start to fire season...what like...

    1946...State wide heat, Bushfires. Sydney homes in Danger. SMH 13/9/1946
    1940...Heat in Sydney. The West Australian 9/9/1940
    1895...Drought and Bushfires The Advertiser Friday 13 September 1895
    1945...Bush Fires, Heat And Fierce Winds The Sydney Morning Herald Friday 21 September 1945
    1965...HOTTEST SEPTEMBER DAY Early bushfires widespread, The Canberra Times 27 September 1965
    1994...Early start to bushfire season The Canberra Times 21 August 1994
    1964...Bushfire danger. The Canberra TimesThursday 13 August 1964
    1956...BUSHFIRE RISK IS GRIM STATES OFFICIAL. The Central Queensland Herald 13 September 1956
    1950...Bushfire Peril In N.S.W. And Queensland The Advertiser 25 September 1950
    1918...A Terrific Bushfire ENORMOUS DAMAGE IN TAMBO DISTRICT. MITCHELL, Townsville Daily Bulletin 26 September 1918
    1932...HUGE BUSHFIRE. FARMS IN DANGER. Rockhampton Menace. The Brisbane Courier 27 September 1932

    etc etc

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    1. Gerard Dean

      Managing Director

      In reply to Marc Hendrickx

      Again, Mr Hendrix demolishes a poorly researched article with things called 'Facts'

      But seriously, imagine this line from the article above appearing on the website advertising a new housing development -

      "New dwellings could be small and compact ....and using more resistant or cheap and easily-replaced materials."

      'cheap and easily-replaced materials" what exactly are these magical materials?

      I am going to bed.

      Gerard Dean

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  3. R. Ambrose Raven

    none

    Ah! This touching, childlike faith in the invisible hand, another deeply deluded individual taken in by the advertising, an eager servant of capitalism anxious to render homage at the altar.

    Yes, the issues are very very real, but insurance premiums are a far more blunt and capricious instrument than the instrument to divine guidance portrayed here.

    Leaving it to a greedy, scheming and capricious cartel of insurers, plus unaware, disinterested, ill-informed, consumers absolutely guarantees…

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  4. Mark McGuire

    climate consensus rebel

    Quote: "Poor housing in disaster-prone areas will remain home to the least well-off members of society. Perhaps the notion of “climate change ghettoes” will be added to the litany of forms that currently identify places of disadvantage in Australia."

    Egad. Spare me! Got a problem with the communication of climate science?
    https://theconversation.com/search?q=communication+climate+science

    The above quote is a prime example.

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  5. Hugh McColl

    Geographer

    One of Australia's fastest growing regions is north Queensland and the cities of Cairns, Townsville, Mackay, Gladstone etc. Each of these cities is in a position to cop a direct hit from a Category 5 cyclone. By a stroke of luck, Cat5 Cyclone Yasi (2011) hit only relatively minor habitation near Cardwell and Mission Beach but could easily have struck one of the big cities. Developer and government policy is following the resources boom and driving the expansion of these cities - Townsville's Lavarack…

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  6. R. Ambrose Raven

    none

    Ah! This touching, childlike faith in the invisible hand, another deeply deluded individual taken in by the advertising, an eager servant of capitalism anxious to render homage at the altar. In fact, leaving it to a greedy, scheming and capricious cartel of insurers, plus unaware, disinterested, ill-informed, consumers absolutely guarantees gross inequity.

    Consider three issues that stand out from the 2009 Queensland flood and Christchurch earthquake disasters:
    1. dishonest, mean and tricky…

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