As South-East Queensland and New South Wales wade through the devastation of storms and flooding that now threatens the greater Sydney region, residents and businesses will be turning to insurance as their only hope of recovery.
Unfortunately, many people will find that they are either not insured or underinsured against this sort of catastrophe either because premiums have become unaffordable or because they have become unavailable because of the increasing frequency of extreme weather events.
Without insurance payouts they will find it hard to recover, causing emotional and economic hardship for them, their communities and the Australian economy.
The insurance gap keeps growing
The potential for disaster and the lack of insurance to pay for recovery were already known. Australia is among the most exposed countries in the world to extreme weather events and also one of the least insured advanced economies.
Floods in March 2021 resulted in A$2.9 billion worth of damage. The current bill will probably be higher and, without individual insurance, taxpayers are likely to have to pick up the bill - even though they shouldn’t have to.
Australia is in a vicious cycle: each disaster increases underinsurance, forcing taxpayers to help out, and the more it happens the more underinsurance grows.
To stop this cycle, the government needs to do two things: reduce the risk of damage to properties, and subsidise insurance for those who remain at risk.