“There’s a gamble being made between the value of the dwelling for someone to live in and the risk the dwelling becomes uninhabitable,” says Jago Dodson, a professor of urban policy at RMIT University.
“We shouldn’t be gambling in that way because of the disruption that poses to our communities. We should be really getting to a point where our planning processes are sophisticated enough not to put people in harm’s way.”
Karri Crossing and partner Hayden Muirhead, along with their 6-year-old Juno and 8-week-old Ziggy, climbed on the roof of their Lismore apartment to be rescued during the 2022 floods. Credit: Paul Harris
As South East Queensland and northern NSW cleans up the damage wrought by ex-tropical cyclone Alfred, attention is already turning to mitigating future disasters, the cost to government budgets and the economy, and what this all means for insurance premiums that have already surged 16 per cent over the past year.
The rising cost of insurance is shaping to play a major role in the federal election campaign, which will be fought partly on the cost of living. Even before Alfred made landfall on March 8, Prime Minister Anthony Albanese had already warned insurers to “not rip people off”, while opposition leader Peter Dutton has repeatedly threatened the insurance industry, which has been making multibillion-dollar profits, with forced divestiture.
But if the country is serious about tackling rising premiums – and protecting communities – experts say the focus must properly turn to reforming planning laws.
There is a range of factors that affect insurance premiums, but worsening disasters fuelled by climate change, as well as inflationary pressures on supply chains and labour, are pushing up the cost for insurers and consumers.
Aerial shots of ex-tropical Cyclone Alfred’s impact on the Sunshine Coast.Credit: Nearmap
Dodson says the three tiers of government need to coordinate better on housing policies, planning laws, disaster preparedness and the reconstruction process.
“When housing developments are being considered, the disaster response is not actively involved in the discussion … and that’s an immediate thing that needs to happen,” he says.
“There needs to be stronger evidence-based flood hazard assessments, better standards so there’s consistency across different local areas. And then planning [laws] need to start putting in a stronger disaster-risk perspective in the decisions that are being made.”
‘Insurance companies have limitations in terms of data they hold and utilise when setting insurance premiums.’
Jago Dodson, a professor or urban policy at RMIT University.
A report Dodson co-authored for the Australian Housing and Urban Research Institute (AHURI) examined the need for housing policies to place greater priority on reducing disaster risks, and called for policies and processes to be streamlined to support households to move away from risk areas, including through buy-back schemes.
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But any restrictions to where homes are allowed to be built is politically controversial, especially at a time when the nation faces a dire housing shortage, and landowners could make losses on their properties.
“The requirement to consider natural hazards as a priority would also enable planners to make more ‘courageous’ decisions to limit development in risky areas,” the AHURI report states.
“At present, because of pressure for development to match population growth and support economic growth and housing supply, decisions that refuse or limit development can be difficult to make and communicate.
“This tension is exacerbated by the existing context where planning is often depicted as a barrier to new residential or industrial development.”
Last year, the general insurance sector wrote 41 million policies for households and businesses and incurred more than $32 billion in claims, according to the Insurance Council of Australia (ICA), which has called for a $30 billion 10-year flood defence fund, jointly paid for by the Commonwealth and Queensland, NSW and Victorian state governments.
Prime Minister Anthony Albanese visited the Gallipoli Barracks in Brisbane during ex-tropical cyclone Alfred. Credit: Getty
The lobby group wants $15 billion invested in new infrastructure, such as levees and dams, $5 billion on strengthening properties in harms’ way, $10 billion on buy-back scheme, and $150 million to future-proof existing flood mitigation infrastructure.
It points to research it commissioned the Centre for International Economics to conduct that found levees in the Queensland towns of Roma and St George had a benefit-cost ratio of 4.9 and 5.4, respectively. Meanwhile, research by McKell Institute found between 2005 and 2022, successive federal governments had spent $24 billion on disaster recovery and relief but invested only $500 million in prevention measures.
“There are places that are not safe to live in; they flood regularly,” said Matthew Jones, the general manager at ICA. “It’s just absurd that the cost is borne by everyone, and we need to make some tough decisions about where it’s appropriate to live in this country … If we want to reduce premiums, and the insurance sector does want to do all that it can to put downward pressure on premiums, then we need to reduce the risk that’s present.”
Of the 225,000 homes at the highest risk of flooding, only 23 per cent have flood cover, compared to an estimated 60 per cent nationwide.
The insurance industry says those low levels of flood cover are “almost certainly” influenced by the higher cost of flood insurance, with households quoted premiums of more than $7000 and in some cases exceeding $30,000.
The impact of those exorbitant premiums are compounded by the fact that more than a third of households exposed to the highest flood risk are in areas where the median income is below the national average ($92,000), and a third are in areas where the median income is below the poverty line ($58,000).
While planning reforms are critical, Dodson wants insurers to take greater responsibility identifying properties that have been upgraded to mitigate against disasters.
“Insurance companies have limitations in terms of data they hold and utilise when setting insurance premiums,” he says. “They’re not sophisticated in getting to the individual property level … of people who have done flood mitigation works and those who haven’t.”
It’s still too early to tell what the impact of ex-tropical cyclone Alfred will be on premiums, but the federal government’s Cyclone Reinsurance Pool is expected to shield insurers – and ultimately consumers – from huge cost imposts.
The damage could have been far worse if Alfred made landfall as a Category 1 cyclone as initially forecast, but Sharanjit Paddam, principal at Finity Consulting, says Australia cannot rely on luck to protect itself.
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He also wants the country to use the latest disaster as an opportunity to reform our planning and building laws to not just protect livelihoods but also put downward pressure on insurance costs. He co-authored a report with the Actuaries Institute that found as at March 2024, 15 per cent of households experienced home insurance affordability stress, up from 10 per cent two years earlier.
“We need homes built to withstand the current environment in the right place,” Paddam said. “We need to spend that money now to reduce our losses going forward.”
There is no single panacea to dealing with natural disasters, but every piece of the puzzle counts, Lismore mayor Steve Krieg says.
There is a sporting club in the regional NSW town that is inundated in water each time there is moderate flooding, Krieg says. For the past 18 months, the council has had a program to clean the town’s stormwater drains, some of which hasn’t been touched in three decades.
When Lismore flooded two weeks ago, the club emerged unscathed for the first time, Krieg says.
Steve Krieg on the streets of Lismore in the days after the 2022 flood. Credit: Elise Derwin
“That mitigation type of work, that proactive work around the drainage network, the river system, flood mitigation works – they all play a role in preventing these disasters from having a big impact on our population base, and it comes back to whether the state and federal governments want to invest in recovery or whether they want to invest in prevention,” he says.
A spokesman for emergency management minister Jenny McAllister said in late 2022, national cabinet tasked planning ministers with developing a national standard for considering disaster and climate risk.
“We delivered on our election commitment to establish the Disaster Ready Fund, a $1 billion fund which provides $200 million in Commonwealth funding each year for disaster mitigation and resilience projects,” the spokesman said.
“This includes $20 million towards the Queensland Household Resilience Program, which has enabled participants to save, on average, 9 per cent on their insurance premiums, up to 25 per cent in some cases. ”
The federal opposition was contacted for comment.
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