Extreme Weather Conditions Triple Insurance Claims in Australia

A man cycles past a downed tree as inclement weather from Cyclone Jasper impacts Cairns in far north Queensland on Dec. 13, 2023. BRIAN CASSEY/AFP via Getty Images

Insurers paid customers affected by extreme weather events an average of $2.1 billion ($1.4 billion) annually over the past three decades, signifying how climate change has affected the economy.

Insured losses from declared insurance catastrophes also grew from 0.2 percent of GDP from 1995 to 2000 to 0.7 percent for the last five years, the Insurance Council of Australia’s (ICA) Insurance Catastrophe Resilience Report 2023-24 showed.

According to the report, insurers incurred $2.19 billion in claims from extreme weather events last year, the same amount as the previous year. However, the body also observed 157,000 claims for the last 12 months, which is 66,000 more than in the previous period.

“Flood is Australia’s most costly natural peril, and it’s estimated that around 1.2 million properties face some level of flood risk,” said Andrew Hall, chief executive of ICA.

“Around 230,000 of these have a one in 20 chance of a flooding each year, with a further 420,000 properties facing a one in 50 or one in 100 annual chance of flooding, odds that translate into higher premiums which can lead to a growing protection gap.”

A study published by the University of New South Wales (UNSW) in February reported that 2023 was the year when Australia experienced multiple severe weather abnormalities, such as Cyclone Jasper in Queensland, the South Australian heatwave, winter heat in NSW, and devastating floods in the Northern Territory and Queensland.

Andy Pitman, leading climate scientist and director of the Australian Research Council’s Centre of Excellence for Climate Extremes, said that specific extreme weather events are occurring more frequently in Australia in 2023 than in previous years.

“Some of them were occurring one after the other or close to each other. These temporally and spatially compounding events had a substantial impact on our environment and were difficult for us to deal with,” Pitman said.

Data from the ICA report also showed that the costliest weather event of the past 12 months was the Christmas storms that impacted the Gold Coast, NSW, and Queensland, resulting in $1.33 billion in claims.

Furthermore, the report added that the greatest impact on individual customers was Cyclone Jasper, which hit Queensland last December. The average claim was $36,000, almost three times the average claim for the Christmas storms.

In a previous statement, Minister for Emergency Management Murray Watt said that the Albanese government is working to implement the recommendations from the final report of the Independent Review of the Australian Climate Service (ACS) to address emergencies brought by climate change, such as transferring emergency management support functions from the ACS to the National Emergency Management Agency (NEMA).

“Bringing these capabilities in-house at NEMA is yet another way the Albanese government is ensuring the Commonwealth is ready and able to assist communities preparing for natural disasters,” Watt said.

The ICA said the report submitted to Canberra would also include policy recommendations for the government to consider.

“In the last few years, Australian policymakers have started to think more seriously about this issue, and in many ways, we are leading the world in our approach to extreme weather risk mitigation and insurers’ product offerings that respond to these risks,” Hall said.

“De-risking is the only sustainable way to reduce the pressure on premiums and close the protection gap: improved planning so no more homes are built in harm’s way, stronger buildings that are better able to withstand extreme weather, greater investment in public infrastructure to protect communities, and an ongoing program of home buybacks where no other mitigation is possible.”