Extreme weather in Australia is costing insurers $4.5 billion annually, a figure that has tripled over three decades, 9 News reported. This increase is largely due to climate-related weather events like floods, as outlined by the Insurance Council of Australia. 

What’s happening?

Research shows that insurers set aside $4.5 billion to manage severe weather damage. Floods, in particular, have driven up claims significantly, with costs tripling since the 1990s even after accounting for inflation. 

Andrew Hall, ICA’s chief executive, emphasized that this problem goes above and beyond the historical losses from natural disasters, with every extreme weather event compounding on the previous ones.

Hall stated, “Australia is in a global race to ensure its built environment has the resilience needed to protect assets — this data clearly shows that each decade is costlier than the last, with insufficient investment in resilience leaving Australians to shoulder an outsized economic burden.”

Recent floods, such as the North Queensland floods, ex-Tropical Cyclone Alfred, and the NSW Mid North Coast and Hunter floods this year, accounted for almost $2 billion in damage, demonstrating the heavy financial impact.

Why are these findings important?

While insurance companies foot the bill for most of this damage, there is another toll paid in human lives, not to mention the stress and trauma of relocation and reconstruction. 

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The research also reveals a serious imbalance in coverage, with numerous buildings uninsured. Those in poorer conditions or with limited resources are more vulnerable to such events because they are more likely to buy the cheaper properties in flood-prone areas, an effect that has also been observed in the United States. That means these costs are being paid not by large insurance companies, but by individuals, many of whom cannot afford it and will not recover financially.

According to the ICA, 186,000 of the 242,000 at-risk homes in Australia lack insurance, with many residents from lower socioeconomic backgrounds. 

“There’s a clear correlation between high flood risk and socioeconomic disadvantage, with our country’s most vulnerable the least likely to have an insurance safety-net when disaster strikes,” the ICA stated.

What can we do to lower the impact of floods?

Efforts to relocate to safer areas and improve building standards to resist floods are essential. Sustainable construction can help mitigate risks and also reduce heat-trapping air pollution, which contributes to Earth’s rising temperatures and leads to more severe natural disasters.

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