The Australian Government has announced the establishment of a taskforce aimed at addressing the issue of insurance affordability in high-risk areas prone to natural hazards. Assistant Treasurer Stephen Jones unveiled the creation of the Insurance Affordability and Natural Hazards Risk Reduction Taskforce, which will focus on devising a comprehensive strategy to mitigate the impacts of disasters on communities and tackle rising insurance costs driven by more frequent and severe weather events.
Jones emphasized the strain on household budgets due to escalating insurance expenses, citing natural hazard risks as a significant factor exacerbating affordability challenges for Australians nationwide. The taskforce, to be led by the Department of Prime Minister and Cabinet, will concentrate on initiatives such as community-level risk reduction, hazard risk mitigation, economic ramifications of underinsurance, and standardizing definitions of natural hazards. These efforts will be augmented by ongoing work conducted through the Hazards Insurance Partnership.
While specific details regarding the taskforce’s composition, reporting timeline, and terms of reference are yet to be disclosed, the Insurance Council of Australia is anticipated to play a pivotal role, according to reports by Insurance News. Jones emphasized the importance of collaborating with various government agencies to ensure a holistic approach to reducing natural hazard risks.
The escalating frequency and severity of natural disasters over the past decade have led to a corresponding increase in insurance premiums, with climate change projected to exacerbate these challenges, rendering certain regions uninsurable. A report by the Climate Council in 2022 highlighted the potential for approximately one in every 25 properties in Australia to become uninsurable due to heightened risks of riverine floods, bushfires, and extreme weather events. The impact is even more pronounced in the ten most at-risk electorates, where approximately one in seven properties may face uninsurability.
The ramifications extend beyond residential properties to encompass small and medium businesses as well as the agricultural sector. The Insurance Council of Australia echoed concerns regarding the escalating severity and regularity of disasters, citing the $7.28 billion in insured losses from over 302,000 disaster-related claims lodged in 2022 alone. Notably, the northern New South Wales and south-east Queensland floods accounted for $6 billion of these losses, marking the costliest insured event in Australian history and the second costliest globally in 2022.
The organization underscored the mounting challenges posed by worsening climate impacts, warning that the affordability of insurance in high-risk regions may become increasingly untenable as extreme weather risks escalate.
