Thursday, 8 September 2022
New research released today shows that extreme weather events over the past 12 months cost every Australian household an average of $1,532.
Commissioned from leading think tank the McKell Institute by the Insurance Council of Australia (ICA), The Cost of Extreme Weather also shows that over the last 10 years the average annual household cost of extreme weather has been $888, but that this figure is expected to jump to more than $2,500 a year by 2050.
The big jump in the 2021-22 average household cost is largely attributable to the cost of the record-breaking February-March floods, and includes government expenses paid for through taxes, insurance costs, uninsured damage, and increased prices due to supply chain shortages.
The Cost of Extreme Weather is released today alongside the Insurance Council’s second Insurance Catastrophe Resilience Report, which uses insurer data and insights to review the last 12 months of extreme weather events and advocate for changes to reduce the impact of future events.
Key findings from both reports include:
- Since 2005, Commonwealth expenditure on disaster relief was $24 billion while spending on disaster resilience was just $500 million – or around two per cent of all expenditure
- By 2050, Australian households will be paying $35.24 billion every year (in 2022 dollars) for the direct costs of extreme weather
- In 2021-22, insurers paid $6.41 billion from more than 380,000 claims across multiple events, which was $3.9 billion more than the previous 12 months
- The February-March flood has so far reached $5.28 billion in insured losses from more than 233,000 claims and is the costliest natural disaster in our history after the 1999 Eastern Sydney Hailstorm ($5.57 billion in insured damages normalised to 2017 values)
- The local government area that suffered the greatest loss from this year’s floods was Brisbane, at $1.38 billion, followed by Lismore at $508 million
- The incurred loss per adult was $20,000 for Lismore, compared to $1,500 for Brisbane
- Claims from Lismore averaged almost $80,000, Ballina $64,000, Byron and Richmond Valley both around $50,000, and Brisbane around $30,000.
The Insurance Catastrophe Resilience Report looks at how climate change is impacting the availability and affordability of insurance in areas experiencing worsening extreme weather such as cyclones, bushfires, and floods.
The ICA report also looks at insurers’ community engagement following this year’s extreme weather events and how communities are responding and recovering.
Comment attributable to Andrew Hall, CEO Insurance Council of Australia:
This is the second Insurance Catastrophe Resilience Report from the Insurance Council and clearly shows that we are dealing with the impacts of climate change right now.
The new data highlighted in our report and from new research from the McKell Institute are stark reminders of the urgent need to invest in strengthening our communities against worsening extreme weather.
Over the last decade the percentage of all spending in resilience and mitigation has declined in comparison to the money spent on recovery and clean-up, and this is again a reminder why we need the change in policy thinking.
Progress is being made by the new Federal Government, who yesterday introduced legislation to invest $200 million a year in resilience measures through its Disaster Ready Fund.
But states and territories must also do their bit and match this funding to protect communities from worsening extreme weather.
They should also act now to reform state taxes on insurance products as an immediate measure to make insurance more affordable and lift the level of cover against extreme weather events.
Comment attributable to Michael Buckland, CEO McKell Institute:
The 2022 floods along Australia’s East Coast not only impacted millions of people and cost more than $5 billion in insurance damages, but they also showed that even individuals who were not directly impacted by the event bear the economic and social cost.
Every Australian pays for natural disasters through the rising cost of produce or shouldering the tax bill for recovery.
The direct costs from extreme weather events are estimated to grow by more than five per cent above inflation and reach more than $35 billion by 2050.
In just under three decades Australian households will be paying more every year for the direct costs of extreme weather events and the wider economic costs will be even greater.
This report shows that we must act now to curb this growing impost.