NSW is again cleaning up after major floods. Are we veering towards the collapse of insurability?

Once again, large parts of New South Wales have been devastated by floods. It’s estimated 10,000 homes and businesses may have been damaged or destroyed and the Insurance Council of Australia reports more than 6,000 insurance claims have been received for the Mid North Coast and Hunter region.

Hundreds of families are displaced. With many homes now uninhabitable, they face a uncertain future.

As the mop-up begins, stories are emerging of households and businesses not covered by insurance, with some residents saying insurance companies were asking up to A$30,000 annually for cover.


There are many others who are underinsured, with insurance payouts not meeting the full costs of rebuild, repair and replacement. The Insurance Council of Australia has declared the event an “insurance catastrophe”.

The impacts of these floods reflect global trends. In 2024, there were around 60 natural disaster events that each exceeded A$1.5 billion in economic losses. Total losses worldwide reached A$650 billion.

As one of the most disaster-prone countries in the Western world, is Australia the canary in the coalmine for a global collapse of insurance? With these types of disasters escalating in a changing climate, it is reasonable to feel – and fear – this is the case.

An uninsurable future?

In 1992, sociologist Ulrich Beck argued unpredictable global risks, such as climate change, would bring an end to the private insurance market, with profound effects on the modern world.

The idea of an uninsurable future stirs up imaginings of apocalyptic landscapes – crumbling buildings, streets strewn with refuse and people eking out a living amid the rubble and ruins.

But the reality is, as we are seeing in central NSW, it is not a future event that demands attention. Many individuals and communities are already living with an unfolding collapse of insurance affordability and availability.

The consequences can be dire, especially for those already struggling to make ends meet.


image1.png
On Tuesday, Prime Minister Anthony Albanese visited flood-affected areas in Taree, NSW. Dean Lewins/AAP




How are governments responding?

Speaking on ABC radio on Thursday morning, NSW Premier Chris Minns said he would be “putting the heat” on insurance companies:

In the lead-up to the federal election, both major parties made clear they believed insurers were “ripping off” Australians. The Coalition even proposed new emergency divestiture powers that would allow the government to break up major insurers in the case of market failure.

But this is no solution at all, given insurance pricing and coverage is largely set by global “reinsurers”. Reinsurance is a kind of insurance coverage for insurance companies themselves – that is, policies to cover the cost of paying out claims after major disasters.

Just ten multi-billion dollar companies control 70% of the reinsurance market.


Who should bear rising costs?

Insurers, led by the Insurance Council of Australia, are pushing for a Flood Defence Fund and retrofitting homes for disaster resilience, paid for by governments and households.

These ideas might seem logical. But they draw attention away from a thriving industry and regulations and policies aimed at making insurance more affordable and effective for ordinary people.

In places like Australia, the increasing cost of insurance cuts across all types, with the largest rises coming in home, vehicle, and employers’ liability insurance.

Many insurers are reporting healthy profits. Globally, the sector is experiencing “exceptionally strong growth”.

Over the three years to 2024, revenue from premiums in the insurance sector increased by over 21% globally – a “whopping” rise, according to the finance corporation Allianz.


Where to from here?

The insurance sector will continue to grow – and profit – until it no longer can due to climate change and other pressures.

But it is not a future crash of insurers that should be of primary concern. It is the real-time collapse of insurance for households, businesses and communities.

As this collapse of insurance unfolds, it is largely left to households and communities to take action and build resilience.

Examples include squatters taking possession of flood-damaged vacant homes in Lismore and, when combined with the housing crisis, the growth in informal housing and settlements on the fringes of major population centres.

These are desperate responses. But they are also realistic, given governments and insurers are failing to reverse this trending collapse.


image2.png
Repeated disasters have created a housing crisis in Lismore, NSW. Elise Derwin/AAP




What else we could do

After each major disaster event comes a rise in insurance costs and a withdrawal of insurance coverage. To avoid being a canary in the coalmine, Australia urgently needs government intervention in the insurance industry - an industry very resistant to such intervention.

To ensure everyone is adequately covered when disaster strikes, this could come in the form of an equitable and affordable public insurance scheme.

As more Australians lose the ability to insure themselves, governments must also address growing structural inequality that is undermining social cohesion and our capacity for collective resilience.

This article is republished from The Conversation under a Creative Commons license. Read the original article.
 

Seniors Discount Club

Sponsored content

Info
Loading data . . .
The problem is greed,pure and simple.Yes there may be reasons for upping a premium but the question is by how much? It appears genuine reasons are being used as a cover for price gouging.The only way I can see to prevent this is generate a climate of real competition-not phony as is the case in general.Look at how many seemingly independent Insurance companies are owned by the same entity. Another way is to have a separate government operated actuary service and have insurance companies put a case for an increase before it's allowed.
 
We are among many struggling with high insurance premiums because insurers unfairly and without any real reason refuse to insure houses with a particular type of cladding that is very popular, affordable, strong, resilient, fire proof, and easy and cheap to repair or replace. There is simply no reason for them to refuse insurance, but they do so based on very outdated data about a similar product that was a fire risk and was banned decades ago for that reason. If in the US, we could appeal to a regulatory body that would address this unfair discrimination, but not in Australia.
We are limited to a very small number of insurers who will cover houses with this cladding and all of them are much more expensive. Why doesn't the government address this?

I also find it disturbing that governments refuse to address the shocking mess the building industry is in and this is (a) preventing better quality builds that are less likely to be damaged and lead to insurance claims, and (b) driving the cost of repairs and replacements up, thus making insurance more costly because the insurers face a higher than reasonable cost when claims are made. Proper regulation of the building industry would bring costs for both construction and insurance down and would enable better quality builds that would be more resilient.
 
  • Like
Reactions: steamyjack
After decades of making multi millions out of the insured who never claimed a cent, it stinks though heaven that these disgusting Insurance companies are now allowed to rip off every single person by vastly increasing premiums to the point now many thousands of businesses and people can no longer afford to pay the new outrageous premiums!
So many vehicles on the road now have no insurance cover at all - the owners just cannot afford it!
 
  • Like
Reactions: steamyjack
Insurance is not BECOMING UNAFFORDABLE, IT IS ALREADY UNAFFORDABLE to so many households/low income working people

Just another nail in the coffin to becoming a 3rd world country
 
  • Sad
Reactions: steamyjack

Join the conversation

News, deals, games, and bargains for Aussies over 60. From everyday expenses like groceries and eating out, to electronics, fashion and travel, the club is all about helping you make your money go further.

Seniors Discount Club

The SDC searches for the best deals, discounts, and bargains for Aussies over 60. From everyday expenses like groceries and eating out, to electronics, fashion and travel, the club is all about helping you make your money go further.
  1. New members
  2. Jokes & fun
  3. Photography
  4. Nostalgia / Yesterday's Australia
  5. Food and Lifestyle
  6. Money Saving Hacks
  7. Offtopic / Everything else
  • We believe that retirement should be a time to relax and enjoy life, not worry about money. That's why we're here to help our members make the most of their retirement years. If you're over 60 and looking for ways to save money, connect with others, and have a laugh, we’d love to have you aboard.
  • Advertise with us

User Menu

Enjoyed Reading our Story?

  • Share this forum to your loved ones.
Change Weather Postcode×
Change Petrol Postcode×