Bomber warns one million Aussie homes are at risk

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Bomber warns one million Aussie homes are at risk

Areas of Southport suffered extensive damage during the Christmas Day storm including this one from a fallen tree on the corner of Alicia and Shirley St in Southport. Photo by Glenn Hampson

Australia is headed for a full-blown insurance crisis, with a bombshell report from the Australian Prudential Regulatory Authority warning that severe weather is pushing the country towards ruin – leaving a million families exposed.

Under its worst conditions, the financial impact is staggering – annual losses from severe weather are estimated to more than double from $7 billion to more than $16 billion, a surge that can threaten not only homeowners but the entire economy.

The Insurance Council of Australia has warned that “without intervention, Australia will continue to spend billions rebuilding similar homes in flood-prone areas, tying up resources that could otherwise be used to deliver new homes”.

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Strong Tropical Storm Narelle was at Category 3 as it began to impact east of the Top End, but it has built to CAT5 at sea.

An ICA statement said the landmark report released on Tuesday called for urgent and ambitious action and investment to protect communities from the increasing impact of extreme weather.

“Although the number of buildings affected by severe and dangerous hazards is low compared to the total number of buildings, the cost of repairing and rebuilding these buildings is significant.”

“For example, an analysis conducted by Aon shows that 25 percent of the cost of repairing or rebuilding buildings damaged by floods is driven by only 11 percent of high-risk areas.”

The result has been an increase in premiums borne by everyone, which has resulted in almost 5 per cent of Aussies not being able to afford home insurance at all, according to iSelect research.

According to APRA, regional communities will be hit hardest, with insurance gaps in rural areas predicted to explode by more than 40 per cent – leaving almost half of households financially exposed when disasters strike.

APRA has issued a stark warning that a million more homes will now be at risk. Photo by Glenn Hampson

Cairns Northern Beaches experienced severe erosion due to high tides and Tropical Cyclone Narelle – a council lifeguard house and a nearby tree fell into the sea at Holloways Beach. Photo: Brendan Radke

APRA member Suzanne Smith warned that “if homes are uninsured or under-insured, losses may be borne by households, banks or the government”.

Insurance Council of Australia CEO Andrew Hall emphasized the extent of the threat, warning “APRA’s analysis is not a forecast, it is a worst-case scenario if bad weather continues to worsen and more risk is added to our system”.

“Policy decisions about investment in housing reduction that governments are making now can help prevent the growing risk,” he said.

“This is not just an Australian challenge – governments and markets around the world are facing similar pressures. But if we act now we can lead the world in resilience, protect our communities and make insurance more accessible and affordable across the country.”

iSelect comparison expert Sophie Ryan said the country has entered a “new era” of unpredictable weather, which strikes in quick succession and outside of traditional seasons.

“If you leave changes to the last minute, you might be too late,” she said. “Once a weather event or disaster is declared, the insurance is banned … that’s why it’s important to check your cover well in advance of any storms.”

The storm was strong enough to knock over a crane at the Loders Creek development. Photo by Glenn Hampson

Ms Ryan urged households to take action before it was too late, even suggesting a ban on the annual insurance check.

“Use your renewal notice as a reminder, or mark a date on your calendar – maybe August or September – to review your policy before the season starts in October,” he said.

“Really go over your coverage with a fine-toothed comb … If you’ve repaired or purchased any high-value items, you’ll want to make sure these changes are noticeable so you’re not underinsured.”

He also warned of important details being split between insurance companies, with flood, fire and hurricane often listed as “defined events” but subject to written exclusions.

“Doing policy research is also a good opportunity to shop around,” he said. People who have had the same type of insurance for years may be surprised.