Submission to the Select Committee on the Impact of Climate Risk on Insurance Premiums and Affordability
12 Jul 2024
IAG1 welcomes the opportunity to make a submission to the Select Committee on the Impact of Climate Risk on Insurance Premiums and Affordability.
As a large Australian and New Zealand general insurer1, we see the impacts of historic land use planning decisions in the aftermath of a natural disaster. The black summer bushfires and recent years of flooding saw 1 in 25 Australians lodge an insurance claim due to extreme weather.2 Insured costs are only part of the cost of natural disasters, with further long term financial and social impacts on affected communities, such as uninsured property, essential infrastructure damage, business disruptions, psychological stress, injury and loss of life.3
We know natural hazards are a part of everyday life and will continue to happen. However, we believe the ability of communities to safely withstand and financially protect themselves from these risks is determined by what communities build in high-risk locations, how they build and the decision to build there. Additionally, we are seeing the current cost-of-living pressures continuing to have a significant impact on communities. Property insurance is not immune to premiums increasing, therefore making it difficult for policyholders in high-risk locations to sufficiently insure their assets.
Insurance is the only financial protection from natural disasters, and as the weather becomes more severe due to increased climate risk, legacy and planning decisions will continue to impact on property damage and the related cost of insurance.4 Current and future land planning decisions will play a critical role, not only in rising insurance costs, but also across community safety. This may lead to less affordable insurance, underinsurance, and in a worst-case scenario no suitable insurance available, creating a larger reliance on Government assistance following natural disaster events. Without better informed land planning decisions, high-risk communities will continue to be vulnerable, resulting in the less likelihood of families returning to their way of life following a natural disaster.
1 IAG is the parent company of a general insurance group with controlled operations in Australia and New Zealand. Our businesses underwrite almost $12 billion of premium per annum, selling insurance under many leading brands including NRMA Insurance, CGU and WFI (in Australia); and NZI, State, AMI and Lumley Insurance (in New Zealand). With more than 8.5 million customers and information on the majority of domestic residences in our markets, we use our leadership position to understand and provide world-leading customer experiences, making communities safer and more resilient in the future.
2 Insurance Council of Australia, https://insurancecouncil.com.au/resource/three-year-weather-bill-reaches...
3 Australian Business Roundtable, http://australianbusinessroundtable.com.au/assets/documents/Report%20-%2...
4 Severe weather in a Changing Climate – 2nd Edition (2020) Available at https://www.iag.com.au/about-us/research
