Weathering the Storm:
Insurance in achanging climate
AUGUST 2023
In partnership
with:

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEABOUT USCHOICE is the leading consumer advocacy group in
Australia. CHOICE is independent, not-for-profit andmember-funded. Our mission is simple: we work for fair,just and safe markets that meet the needs of Australianconsumers. We do that through our independent
testing, advocacy and journalism.
To find out more about CHOICE’s work visit
www.choice.com.au
ABOUT OUR COMMISSIONING PARTNERSCHOICE engaged the Climate Council, NSW Tenants
Union, Financial Rights Legal Centre and Financial
Counselling Australia for their expertise and guidance
throughout the project. Representatives from theseorganisations assisted with policy advice and therecruitment of interview participants. We are very gratefulfor the time and thought that they put into this report.
The Climate Council is acommunity funded andindependent organisationthat provides evidence,expert advice and advocates for solutions to theclimate challenge all Australians face. The Climate
Council is a courageous catalyst propelling Australia
toward bold, effective action to have our emissions
plummet during the 2020s and hit net zero by 2035.
Financial Counselling Australia(FCA) is the national voice
for the financial counselling
profession in Australia. We area not-for-profit organisation
which provides resources and support for financial
counsellors and works to raise awareness about theavailability and value of financial counselling. FCA
advocates for a fairer marketplace for consumers
and aims to improve hardship processes for people
in financial difficulty. We coordinate the National
Debt Helpline and manage the Small Business Debt
Helpline. Our vision is for an Australia with fewer
people in financial hardship.
Financial Rights is acommunity legal centre
that specialises in2

helping consumers understand and enforce theirfinancial rights, especially low income and otherwise
marginalised or vulnerable consumers. We provide
free and independent financial counselling, legal
advice and representation to individuals about a broad
range of financial issues. Financial Rights operates the
National Debt Helpline, which helps NSW consumers
experiencing financial difficulties. We also operate
the Insurance Law Service which provides advice
nationally to consumers about insurance claims anddebts to insurance companies, and the Mob Strong
Debt Help services which assist Aboriginal and Torres
Strait Islander Peoples with credit, debt and insurance
matters.

CONTENTS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The human impact of extreme weather events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
National data on consumer experiences of home and contents insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Key recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Make home and contents insurance simpler and fairer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Reforms to help consumers avoid unintentional underinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Address unaffordable insurance
premiums in disaster-prone areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Since 1976 the Tenants’
Union of NSW has
been the peak body
representing the interests of tenants and other renters
in New South Wales. It is a Community Legal Centre
specialising in residential tenancy law and policy, andthe main resourcing body for the state-wide networkof Tenants Advice and Advocacy Services (TAASs) in
New South Wales. The Tenants' Union is recognised
for its long-standing expertise in renting law, policy andpractice and is a non-partisan membership-based cooperative and charity.

What do we know about insurance affordability? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ACKNOWLEDGEMENTS
We would also like to thank the following people andorganisations for their input and advice: AustralianCouncil of Social Services, Australia Network for
Disabilities, Berrill & Watson Lawyers, Consumer
Action Law Centre, Federation of Community Legal
Centres (Victoria), Good Shepherd, Legal Aid NSW,
Legal Aid QLD and all the people who shared theirexperiences through surveys and interviews.

Policy research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Policy solutions to assist people with unaffordable insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Improve access to hazard risk information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
How do consumers find out their level of risk? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Lower premiums by reducing risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Helping households to reduce their risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Help people to leave dangerously exposed housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Reforms to assist people in exposed housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Quantitative research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Social research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Mental Health support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Helen Bartley of Bartley Consulting and Elissa Freemanof Elissa Freeman Consulting for the research they
conducted that enabled us to put this report together.
This project is supported by Ecstra Foundation. Ecstra
is an independent charitable organisation committed tobuilding the financial wellbeing of all Australians withina fair financial system. We work with organisations
across government, community, business, consumer
groups, education and research experts.

This report was authored on Gadigal land. CHOICE acknowledge the Gadigal people, the traditionalcustodians of this land on which we work, and pay our respects to the First Nations people of this country.
CHOICE supports the First Nations people’s Uluru Statement from the Heart.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEINTRODUCTION
Extreme weather events are worsening across Australia.
Since the Black Summer bushfires in 2019-20, there
have been 11 declared insurance catastrophes.1 Since
January 2020 insurers have received almost 788,000
claims related to floods and storms that have been
declared catastrophes or significant events. As theclimate warms, the risk of extreme weather events willcontinue to increase, likely bringing disasters at a scaleand severity for which we are not currently prepared.
Home and contents insurance is essential in helping
people and communities recover and rebuild after
these types of events. Insurance ideally provides
temporary accommodation for people whose homes
have been damaged or destroyed, allows them toreplace valued possessions and helps them to rebuild
their homes and lives.

Consumer problems with home and contents
insurance:
1. Complex product design: Home and contents
insurance policies are complex and vary acrossinsurers, with inconsistent and incomparable
definitions for standard terms, deviations fromstandard cover and opaque pricing. This cancontribute to accidental underinsurance forpolicyholders. Policies need to be simpler andfairer for people facing the threat of extreme
weather.
2.

3.
Unfortunately, however, these benefits of insurance
are increasingly out of reach of many people. Climatechange is causing premiums to rise, forcing many
people to reduce their cover or opt out of insurance
altogether. Even where people can afford insurance,
inconsistent and confusing policy terms often meanthat when they go to make a claim, they find they aren’t
covered. And rising costs of rebuilding mean that many
people find they haven’t been adequately insured.
The impacts of being uninsured or underinsured
aren’t just financial — they also have human impacts.
Our research finds that many people who have been
through extreme weather events are experiencing
significant and ongoing emotional harm, with many
reporting ongoing trauma and anxiety, relationshipbreakdowns, exhaustion and suicidal ideation.
This report, commissioned by CHOICE, Climate
Council, Financial Rights Legal Centre, Financial
Counselling Australia and the Tenants Union of NSW
explores the role of the insurance market in responding
to these complex issues. It is informed by a nationwide
survey of people that have home insurance, as well asinterviews with homeowners and people who rent incommunities affected by extreme weather events.

4.

5.

Unaffordable premiums: Insurance premiums are
becoming increasingly unaffordable for people
living in disaster-prone areas. Many households on
low incomes are being priced out of the insurance
market entirely. This contributes to a disasterinduced poverty cycle.
Inaccessible information on natural hazard risk:
People are unable to find out what level of extreme
weather risk their homes face now and in the
future. Inconsistent and unavailable information
is preventing people from making empowered
decisions about how to protect themselves andtheir home.
Mitigation measures are not being considered:
Many people are not being offered lower premiums
if they take mitigation measures which make theirhome more resilient. Insurers should provide
information in a clear and accessible way on
measures people can take to lower their risk.
Dangerously exposed housing needs solutions
beyond insurance: Regions of Australia arebecoming increasingly uninsurable and unsafe
to live. Communities and homes on the front lineof disaster are likely to require solutions beyond
insurance, including relocation.

These problems aren’t going away. They’ll get worse
before they can get better. And fixing them will require
serious and sustained attention by governments andthe insurance industry, to ensure that insurance cancontinue to play a role in assisting people to recoverand rebuild after extreme weather events.

The human impact of extreme
weather events“My tolerance has gone after 3
floods, so has my marriage - itexacerbates what’s underlying[including my] kids’ mental health— we needed to move to givethem stability.
I’d never buy in a flood prone area again— when you go through it, it’s traumatic. It
takes a mental toll. In my workplace there arefarmer suicides.
Over time we have to sell it, divorce requiresit.” Female, homeowner, insured, Windsor
NSW“If I didn’t get the help that I did
and I wasn’t as determined as I
was, it would have come close to
breaking the family… It’s a hugeburden to carry. [Fortunately] thekids did not see our stress. A lot of kids at theschool become anxious, if a storm isapproaching they ask, “Is there hail?”. We are
all on edge every time a storm approaches.
We now always check BOM for storms.” Male,
homeowner, insured, Brisbane QLD“We live with PTSD - if we smell
smoke we’re on the defensive.
The kids with what they havebeen through at that age, all haveanxiety.” Female, homeowner,
insured, Lake Kauai NSW“The house value has gone down
massively - I’m stuck. I don’t havea house that’s saleable. [Homeand contents insurance] cost me$9,000 this year including flood
insurance, I used some of the pay out for it
but I’m not sure if I can afford it next year.“
Mother & son, homeowner, insured,
Hawkesbury river NSW,“[We lost] $117,000 in the flood.
The first few days after the flood
I had a breakdown, I got medical
help. Have been living in ourcaravan for four months.
Living in a caravan, [with] ongoing delays,
it’s stressful and wearing us out. I often
spend three hours or more on hold — it does
your head in - I know they’re busy, but I don’t
get a call back. When I go back to the house
I go to water the garden and used to lookthrough the window, but not much now. I
think, “my god is this my home?” Female,homeowner, insured, Rochester VIC
My daughter has anxiety, every
time it rains, [she asks] “is it
going to flood?”, every time shepacks her things to go to her
other parent’s she has an
outburst of emotion about what to bring, [sheis] very hard on herself. I need a sense ofplace and safety — I don’t necessarily feelthat way." Mother & daughter, homeowner,
uninsured, Lismore NSW“[With] the smell and mould[caused by storm damage], I
wondered how it would affect myson’s lungs — he’s a chronic
asthmatic. The bathroom was anarea my son constantly complained about - itstinks, I could not have any children guests
who bathed - no bath. We told the agent a
thousand times — but it was not until I moved
out that they fixed it.” Mother & Son, tenant,insured, Brisbane

Our research identifies five key consumer problems
that are limiting the affordability and accessibility ofhome and contents insurance.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATENational data on consumer
experiences of home andcontents insurance
Premium hikes
In May 2023, CHOICE conducted a nation wide
representative survey of insurance policyholders.2
People across Australia are facing rising insurance
premiums, which for many, is exacerbating cost ofliving pressures.
In a recent survey of home and contents insurance
policyholders, nearly nine out of ten (87%) said theirpremiums had gone up with their most recent
renewal notice.

For two out of three policyholders (67%), the premiumincrease was higher than expected. For nearly a third(28%) the increase was a lot.

Impact of extreme weather events
In June 2023, CHOICE conducted a nationally representative
survey of home and contents insurance policyholders.3

Two out of five of our survey respondents (39%)
said they were not given any explanation for theirpremium increase.
Two in five (39%) policyholders reported that their home had been
impacted by an extreme weather event in the past five years.

Four out of five respondents said they were not awareof any increased risks to their homes from crime or
natural disasters.

19%

13%

had been impacted byflooding or heavy rain

3%

had been impacted
by cyclones

had been impacted
by hail7%

had been impacted
by extreme wind44%

of policyholders
would consider
investing in home safety measures
to lower the cost of their premium.

had been impacted
by bushfires

78%

10%

However, less than half (46%) ofpolicyholders have ever used a
product disclosure statement tounderstand what they are covered for.

of policyholders
are confident
their insurance covers the costof rebuilding their home.

In the past three years, 39% of policyholders have changed theirpolicy or switched providers to reduce the cost of their premiums.

15%

switched
insurance
providers to reduce thecost of premiums

5%

removedflood cover

6

14%

increased excess
payable in event ofa claim11%

reduced theirsum insured

49%

of renters with insurance
policies have been affectedby an extreme weather event, compared with
36% of homeowners with insurance.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEKey recommendations

5.

Make home and contents insurance
simpler and fairer
1.

2.

3.

4.

8

Legislate standard definitions
The Federal Government should legislate
standard definitions for a broad range of common
terms and conditions in home and contents
insurance contracts. This should include terms
like maintenance, wear and tear, and key natural
hazard events.
Insurers be required to proactively warn
consumers about underinsurance
The Federal Government should legislate that
insurance companies be required to proactively
warn consumers when they suspect policyholders
are likely underinsured.
Adopt a consistent approach to debris removal
The insurance industry should adopt a consistent
approach to the treatment of debris removal under‘sum insured’ policies.
Require insurers to disclose the price of natural
hazard risks
The Federal Government should require insurers to
identify the component of an insurance premiumthat is based on natural hazard risk for new andrenewing home and contents policies.

Landlord insurance policies should include
temporary accommodation for people who rent
Insurance companies should include coverfor temporary accommodation for tenants inlandlord insurance policies when their home isuninhabitable due to an insured event.

Address unaffordable insurance
premiums in disaster-prone areas
6.

7.

8.

Subsidise insurance in areas where it isunaffordable
The Federal Government should trial subsidies forhome insurance in communities where insurance
is unaffordable for most people and particularly forpeople on low incomes.
Microfinance insurance product trials
Governments should expand funding for trials of
microfinance insurance products to provide accessto insurance for people on lower incomes.
Investigate affordability
The Federal Government should conduct an
independent review of the current and futureaffordability of home insurance, particularly forhouseholds on lower incomes in extreme weather
prone areas.

Improve access to hazard risk information
9. Build a single source of information on risk
to properties
Governments should work together to developa Hazard Risk Database that provides easily
understood, publicly available information on current
and future climate risks to individual properties. This
Database should include data on the risk of floods,
cyclones, bushfires and coastal erosion.

12. Allocate financial assistance for
mitigation measures
Governments should allocate sufficient funding toassist property owners on low incomes and social
housing providers in disaster-prone regions toundertake approved, cost-effective property-level
mitigation measures.

Help people to leave dangerously
exposed housing

Lower premiums by reducing risks
10. Ensure that people are rewarded for taking steps
to mitigate risks to their properties
Insurers should be required to consider relevant
property-level mitigation measures in any new orrenewing insurance policy, and to demonstrate
how those measures have been reasonablyreflected in the proposed premium. Governments
and insurers should provide advice on mitigation
measures that people could take and provide freeassessments for people who have undertaken
mitigation on their homes.

13. Plan for relocation of communities at high risk
National Cabinet should agree on a clear andconsistent approach to supporting relocationof communities that face a high risk of natural
disasters.
14. Fund community engagement
Governments should provide funding fordangerously exposed communities to undertake
consultations about ways to mitigate future risk,
including the possibility of relocation.

11. New obligations for rented homes to be
more resilientState and territory governments should amend
residential tenancy laws to require landlords totake reasonable steps to make rented homes
resilient to climate risks.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Reforms to help consumers avoid
unintentional underinsurance

Make home and contents
insurance simpler and fairer“They make it so impossible three pages of tiny print inlanguage you don’t understand— it’s the insurance company’s
responsibility to communicate
clearly - most people don’t read it - where is
the transparency from their end?”
Female, uninsured, homeowner, flood in
Northern NSW“I definitely read the fine print,
but still find it confusing whether
to claim [it] as storm or flood …
Before I took [the] initial policy in2011 I read the PDF to makecertain we were covered for flood - I find it
difficult to work out what’s building andcontents.” Husband & wife, insured,
homeowners, flood in NSW“I definitely read the fine print,
but they still catch you out. Overthe years, it’s become a bit
simpler to understand the policy,
but areas like fences, shade
cloth, tools, are vague. I’m the person whorings to confirm what’s in the policy.
Insurance companies do not like to put things
in writing.” Female, insured, homeowner,
cyclone in WA“I glance at the policy - I don’tread it in detail, I have a life. Ifthey were in plain English I mightread it but they are not and I
don’t have the patience for it.”
Female, insured, homeowner, cyclone in QLD

10“I don’t read the fine print; I
probably never have. When you
buy an insurance policy you lookat the cost and base the decision
as to whether you can afford to
add onto it or not.” Female, insured,
homeowner, flood in Rochester VIC“I don’t read any fine print; I don’tknow much. I get my knowledge
from talking to them on thephone — I tell them what I need it
to cover.” Female, insured,
homeowner, hailstorm in QLDHome and contents insurance policies should beclear, simple, and offer a baseline level of protection to
consumers. However, many policies are complex, withlengthy terms and conditions that vary significantly
across insurers, making it extremely difficult for
consumers to understand policies, let alone compare
the policies of different insurers.
This complexity leads to many people being
underinsured, without knowing or intending it.
Unintentional underinsurance occurs when an
insurance policy fails to deliver the level or type ofprotection that a policyholder expects. It leaves many
people across Australia financially vulnerable whenextreme weather occurs. Policymakers need to makeinsurance policies fairer and simpler for people toprevent unintentional underinsurance.

Key fact
Analysis conducted by the Financial Rights
Legal centre identified that 18.3% of theirclients affected by bushfires were underinsured.
Underinsurance was the most common issue
raised by the Centre’s bushfire affected clients.
Debris removal was also a key concern for 10.6%of clients affected by bushfires.4

Standard definitions for home and contents
insurance policies
Insurance policies have considerable variation in terms
and conditions, including inclusions and exclusions.
Consumers need simple and standardised definitions
to be able to meaningfully compare home and contents
insurance products and understand what the policy
they choose covers.
Following a series of floods that particularly affected
Queensland in 2010 and 2011, many people found thatthey were not insured for events that destroyed theirhome as a result of inconsistent approaches to thedefinition of flood. In 2012, in response to this problem,
the Federal Government introduced a standard
definition of flood. This reduced confusion about flood
cover but has allowed insurers to adopt an inconsistent
approach to many other terms - including terms thatdefine damage that may be associated with a flood,
such as damage from storm water and runoff.
In October 2022, the Federal Government announced
that it will develop standard definitions for certain
natural hazards in insurance contracts and that it would
review the standard cover regime to improve consumer
understanding of insurance products.5
Standard definitions for a broad range of terms willassist in the comparability of insurance products.
Terms that would benefit from a standardised
definition include:● maintenance● wear and tear● bushfire and smoke damage● rainwater/stormwater and runoff● tidal surge/acts of the sea● malicious damage● temporary accommodation
Stakeholders interviewed for this report noted thatcomplex and diverse policy terms and definitions cancontribute to unintentional underinsurance.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Multiple stakeholders noted NRMA’s decision to bundle
exclusion of flood cover with exclusions for rainwaterrun-off and storm surge cover. This meant that NRMA
customers who elected to opt out of flood cover also
lost cover for rainwater runoff and storm surge but
many policyholders were not aware of this until theycame to make a claim. Stakeholders suggested that if
NRMA took the same approach of other insurers, who
include cover for rainwater runoff and storm surge
for people who have opted out of flood cover, many
policyholders in areas affected by major floods may
have been eligible for some benefit. NRMA’s approach
appears to be inconsistent with the intention of thestandard definition of flood, which was to create aconsistent approach across the industry to floodrelated damage.
The another example of a common policy term thatneeds a more adequate definition is temporary
accommodation. Home and contents policies typically
include cover for temporary accommodation where theinsured property is uninhabitable for up to 12 months
but recent disasters have highlighted that this can beinadequate, with temporary accommodation coverrunning out before policyholders have had a chance torebuild. Legal Aid NSW said:“Twelve months temporary accommodation
coverage is no longer fit for purpose in adisaster-prone world where finalising claims
can take considerably longer than it used to.”A standard and fair definition of temporary
accommodation would ensure that people areless likely to face homelessness or the risk ofreturning to a damaged home.
The standard cover regime needs to be updated
The standard cover regime for home and contents
insurance sets out a baseline level of cover but insurers
are not required to follow it.

Insurers can deviate from the standard cover, if they‘clearly informed the insured in writing’ or ‘the insured
knew, or a reasonable person in the circumstances
could be expected to have known, that the contract
provided less than the standard cover or no cover’.6
Insurers often communicate a deviation from thestandard cover in the product disclosure statement
but product disclosure statements are complex andcan run over 100 pages. CHOICE research foundthat only 46% of people read the product disclosurestatement for their policy and given the complexityof these documents, it is likely that even less people
fully understand it. Monash University found that when
given the option of a bad, okay and good policy, up to
42% of people would choose the bad product.7
An improved standard cover regime will give
consumers more protection and ensure they haveaccess to a clearly defined, appropriate level ofminimum cover. In particular, the review of the regime
should examine better ways of informing consumers of
the impact of any deviations from standard cover.
We welcome the Federal Government's commitment toreview the standard cover regime.
The Federal Government should legislate component
pricing for natural hazard risk
Opaque pricing of insurance premiums makes it hardfor consumers to understand how an insurer has
assessed the risk of extreme weather events to theirproperty and how this affects their premium. Whenan insurer provides a quote for a new or renewing
insurance policy, this should include a breakdownof the components of the premium for each typeof natural hazard their home faces. This practiceof component pricing would act as a price signal
about the risks people face and would enable themto make more informed decisions. It would also
remove information asymmetries between insurancecompanies and their customers.
The Federal Government should introduce legislation
to require insurers to break down prices in this manner.

12

Insurers need to proactively warn of underinsurance“I haven’t counted the cost, when
I think about [the damage to]aircon, electricity, water meterthat I had not considered I’mprobably underinsured - I havenot got the energy, [I am] busy trying to keep
my job.” Female, insured, homeowner, floodin Hawkesbury river region of NSW“[It’s very difficult to] know if
you’re underinsured, evenbuilders are not prepared to say,
you can only go on the value ofwhat houses are being sold,
subtract the land value and hope you haveenough money.” Female, insured,
homeowner, cyclone in WA
Rebuilding a home after it has sustained significant
damage is more expensive than most people realise.
In addition to the construction costs, there are costsof clearing the site (potentially including hazardous
material), temporary accommodation and professional
engineering and architectural services. In some cases,
people need to rebuild to higher building standards
than those that applied to their previous home.
Construction costs can also quickly escalate due toshortages if a large number of homes are affected at
the same time in the same geographic region.
It is not unusual for people to find themselves uninsured
after an event that destroys their home. This meansthat they are then responsible for the gap between thecost of repairing the damage and the payout they can
expect from their insurer.

Some people may not have an accurate sum insured,
which reflects increased building and labour costs.
Insurers can and should be doing more to help
consumers keep their sum insured amount up to date.
Almost half, 45%, of those with home insurance had
not updated their policy for more than 12 months.9
Companies should be required to proactively
warn consumers if they think they are potentially
underinsured. This warning should be built into thepurchase journey. Insurers should also send a warningon renewal notices and include records of the annual
sum insured calculations insurers have done which
resulted in the underinsurance warning. This was a key
recommendation of the ACCC’s Northern Australia
inquiry, which has yet to be adopted10 Community
sector organisations agreed that insurance companies
need to be doing more to assist consumers in thiscomplex process:“Insurers can and should be doing more tohelp consumers keep their ‘sum-insured’
figure up to date.” Consumer Action
Law Centre“We need to see a shift in responsibility fromindividuals to insurers to ensure that the sum
insured remains up to date.” Financial Rights
Legal Centre“The auto-renewal process for homeinsurance doesn’t incentivise consumer
engagement.” Legal Aid NSW

78% of people say they are confident that their homeinsurance covers the cost of rebuilding their home. Yet,
32% of people that have settled an insurance claim
for a bushfire, said that their home insurance was notenough to cover the costs.8
Consumers tend to let their insurance product roll overyear to year without updating the sum insured amount,leaving them at risk of being underinsured when thelevel of risk to their property increases over time.
CHOICE’s research found that 85% of people have notswitched insurance companies in the past three years.

13

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Insurers should adopt a standard industry practicefor debris removal“[In the floods, we lost] all thebeds, all couches, lounge suites,
kitchen table and chairs, books,
photo albums, kids andgrandchildren’s toys, books,
clothes and shoes. We had already thrownout two thirds of our belongings onto theverge. There were 500 B-double [semi trailer]loads of rubbish [from the town].”
Retiree couple, insured, homeowners,
flood in Rochester VIC
Insurers currently take different approaches to coverfor debris removal, with some including costs of debris
removal within what must be funded from the sum
insured and others covering debris removal on topof the sum insured. The costs of debris removal arehighly unpredictable, with most consumers having noexperience that would allow them to calculate them.
After these costs are effectively deducted from thesum insured for policies where this is required, thehomeowner may be left with inadequate funds torebuild.
The Royal Commission into National Natural Disaster
Arrangements noted that the inconsistent approachto debris removal hampered recovery after a disasterand recommended that governments create andpublish standard guidance.11 Governments sometimes
fund debris removal after a major disaster, but theseprocesses can be drawn out and are complicated by
the inconsistent treatment of debris removal undersum-insured home insurance policies. In 2022, theFinancial Rights Legal Centre argued that debris
removal and architectural fees should not be includedin the sum insured but should be provided as benefits
over and above the sum insured12

The ACCC found that insurers can provide clearer
information to their customers to help them choose
the level of cover that they need. Among a suiteof recommendations aimed at helping consumers
choose the right amount of cover, the ACCC has
recommended that insurers should:● estimate a sum insured for customers(Recommendation 18.4) and● disclose costs that count towards sum insured(Recommendation 18.5)13
We are calling on insurers to adopt a standard industry
approach to debris removal after an extreme weather
event, to make policies easier to compare and reduce
the risk of underinsurance.
Include temporary accommodation inlandlord insurance policies
People who rent are uniquely affected by extreme
weather events. Under tenancy laws, a tenancy willcease when a home is declared uninhabitable. Whenlarge-scale disasters strike a region, people who
rent are often displaced from their homes, schools,
communities, family and faith based groups. Others
are forced to live in substandard and damaged homes,
putting their families’ health at risk.
Rebecca's story
The design of landlord insurance policies means thatlandlords receive all the policy benefits of financial
support while a home is being repaired, while people
who rent receive no direct or indirect benefit from alandlord’s home insurance policy. Many people who
rent do not hold contents insurance policies — evenwhen they live in disaster-prone regions. Stakeholders
who contributed to this research suggested that this isbecause contents insurance is relatively expensive forlimited benefit to renters, especially those on
low incomes.

Rebecca and her kids were renting in Brisbane andwere affected by persistent rain in 2022. They did nothave contents insurance:“We didn’t have contents insurance
because of the asbestos in the roof and we
did not plan to live there forever, but I live toregret that decision”.
After days of persistent rain, they discovered there
was water coming through the ceiling. The leaks
started in the lounge and moved to the kitchen andbathroom. The real estate agent sent someone toput a tarp on the house. However, it did not work andcontinued to leak into her home. Rebecca said,“There were buckets everywhere, I wasworried about the kids as there wasasbestos in the roof, so they moved to my
mum’s place”.

14

The family made repeated calls to the real estateagent however the situation did not improve. At one
point the real estate agent sent their father to inspect
the asbestos in the roof and the family was told thehouse was habitable. Numerous notices to remedy
were issued by Rebecca and ignored by the realestate agent. Rebecca said the rain damage waswidespread in her home:“I bought a dehumidifier, mould was
growing in the bedrooms, water ran into thecupboards, I couldn’t shower, or sit on the
toilet. I could not put anything anywhere”.
The family ended up moving out of the home, having
never received a discount in rent. They were taken to
the tribunal for breaking their lease. The homeowner
put the property up for lease again, without making
any additional repairs.

15

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Temporary accommodation should be made available
for people who rent as a provision of their landlord's
insurance policy. This will provide renters with accessto housing, enabling them to stay in their community.

Recommendations
1.

2.

3.

4.

5.

16

Legislate standard definitions
The Federal Government should legislate
standard definitions for a broad range of common
terms and conditions in home and contents
insurance contracts. This should include terms
like maintenance, wear and tear, and key natural
hazard events.
Insurers be required to proactively warn
consumers about underinsurance
The Federal Government should legislate that
insurance companies be required to proactively
warn consumers when they suspect policyholders
are likely underinsured.
Adopt a consistent approach to debris removal
The insurance industry should adopt a consistent
approach to the treatment of debris removal undersum insured policies.
Require insurers to disclose the price of natural
hazard risks
The Federal Government should require insurers to
identify the component of an insurance premiumthat is based on natural hazard risk for new andrenewing home and contents policies.
Landlord insurance policies should include
temporary accommodation for people who rent
Insurance companies should include coverfor temporary accommodation for tenants inlandlord insurance policies when their home isuninhabitable due to an insured event.

Address unaffordable
insurance premiums in
disaster-prone areas
We spoke with a single mother living in Northern
NSW with her two teenage kids and aged parent.
In recent years, she has been affected by the 2017and 2022 floods, the 2019-2020 Black Summer
bushfires, droughts and the COVID 19 pandemic.
She shared:“I’m a single mother on a single mother’spension, I am at risk of homelessness,
I knew I was buying in a flood plain but
did not want to risk being in the rental
market.”She did not have flood insurance when her home
was flooded by just under a metre of water in
2022. She has home and contents insurance, but
opted out of flood cover because of the cost:“It came down to affordability, I had nochoice, I can’t afford flood insurance. I did
look into it, but it was prohibitive, maybe$4,000 plus, I can’t afford it.”Insurance unaffordability is widespread acrossthe community but particularly in disaster-prone
regions where premiums have rapidly escalated. It
disproportionately impacts people on lower incomes
who tend to occupy a greater proportion of housing in
more disaster-prone areas.
Despite many public inquiries investigating the natureand preparedness of communities to respond to natural
disasters, there is still no clear data about the natureand scale of non-insurance and underinsurance due tounaffordable premiums. Many households in regions
struck by floods in 2022 were uninsured and have reliedon post-disaster government assistance to survive andrecover. The consequences of non-insurance makerecovery from a major natural disasterextremely difficult.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

What do we know about insurance affordability?
The Actuaries Institute found that one million households are currently experiencing extreme home insurance
affordability pressure.14 These households face insurance premiums in excess of four weeks of gross income
and are likely to be older, retired and renting, have lower insurance literacy, live in socioeconomicallydisadvantaged areas and have lower current savings balances.
The South Australian Council of Social Services (2022) reported that approximately 6% to 10% of low-income
home owning households do not have home insurance.15 Approximately 50% to 67% of people on a low
income do not have contents insurance. SACOSS describes the following risk factors ‘creating a perfectstorm’ around uninsurance:● Insurance premiums have been rising and will continue to rise with increased natural disasters.
● Financial strain on households has increased during the COVID-19 pandemic, with the risk that thesehouseholds may let their insurance premium payments lapse, leaving them uninsured.
● People on low incomes are more likely to live in areas with higher risk of natural disasters because thehousing tends to be cheaper.
● People on low incomes are unlikely to have the resources or power to engage in much mitigation (because
they’re renting, and/or because of the cost).
A Climate Council national survey found that 1 in 20 people had cancelled their insurance coverage due to anincrease in their home and contents premium and 1 in 9 had reduced their overall coverage. A further 1 in 20
people had been told by their insurance provider that they could not be insured and a third of people that did
have insurance said they were struggling to afford their premiums. The Climate Council found that nearly two
thirds of people reported that their premiums had increased in the last two years.16

The ACCC estimated that 89% of insurable properties
have home insurance. The rate of insurance can,however, vary significantly by location. For example,
the ACCC found that just 60% of insurable properties
were insured in North Western Australia. Lower uptakeof home insurance is associated with regions with alower socio-economic profile and/or higher exposure to
extreme weather.17
The ACCC’s analysis of data from insurers also foundthat as premiums rose, for example in Port Hedland,
the average sum insured declined as people sought tomanage their premiums. This can help to explain thepersistence of underinsurance in disaster-prone areas.

Policy solutions to assist people with
unaffordable insurance premiums
Targeted direct subsidies are needed to assist people
with unaffordable insurance
When the ACCC examined a range of policy measures
to address affordability of insurance in areas ofnorthern Australia affected by cyclones, it identified
subsidies as the most economically effective measure.
The ACCC found that:

Given the growing number of properties affectedby other natural hazards, it is time for the Federal
Government to consider targeted, direct subsidies forsome people for whom insurance is unaffordable. The
use of subsidies could be piloted in communities where
insurance is affordable for most and particularly forpeople on low incomes. Subsidies should be carefullytargeted, with eligibility based on the level of premiumand the person’s income.
While subsidies can help to make insurance more
affordable, they must be balanced with an obligation
not to put people in harm’s way. Poorly designed
subsidies risk sending the wrong signal to communities
living in areas with a high risk of natural hazards about
the level of risk they face.
There may also be other barriers to access that can’t befully addressed by subsidies. Good Shepherd shared:“Subsidies will work for a cohort but not
everyone…If people are excluded from theinsurance market right now, we can’t assume
that they will be ready, willing and able tore-enter that market.”“Direct subsidies have the greatest potential
to work in a targeted way to relieve someof the acute affordability and cost of livingpressures facing consumers in higher risk
areas, at a lower cost and more effectively
than other measures.”1818

19

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEThe ACCC should be funded to monitor the
implementation of a pilot of direct subsidies toensure that insurers do not absorb subsidies andthat subsidies do not significantly distort market
outcomes. Subsidies should also be carefully designed
to complement mitigation programs, rather thanundermine them. A well designed pilot would help
policymakers to determine whether direct subsidies
should be rolled out more broadly.
Microfinance insurance products need to befurther explored
Some people are caught in a disaster-induced poverty
cycle because they did not have insurance, or they
did not have enough insurance, and so they can notafford to rebuild their home or are pushed back into theprivate rental market.
Insurance products need to meet people’s needs,
including the needs of people on low incomes. Microinsurance, which provides insurance products at
an affordable rate specifically to households on low
incomes, could be a partial solution to the problemof access to insurance for people on low incomes.
The South Australian Government has funded Good
Shepherd and the Brotherhood of St Laurence toinvestigate the feasibility of a government funded, notfor-profit, micro-finance home insurance product.
An effective and well-designed microfinance productcould help people on lower incomes have a stronger
safety net during natural disaster events. Governments
should continue to fund trials for microfinanceinsurance products in order to test the degree to whichthese products can address some of the problems withaccess to insurance for people on low incomes.
The Federal Government should initiate an inquiry
into insurance affordability, especially for lowerincome households.
Even if the other recommendations in this report are
implemented, there are likely to be significant andongoing problems with affordability of home andcontents insurance in many parts of Australia. To better
understand these problems and the best ways toaddress them, the Federal Government should conduct
an independent inquiry into insurance affordability. We
recognise that there have been a number of recent

20

existing inquiries on the insurance market, however
there has not been an inquiry which is focused on
insurance affordability across the country. There is alack of data about the rates of insurance unaffordability
in different parts of Australia.
The inquiry should consider:● the current levels of non-insurance andunderinsurance in home and contents insurance● the impact of non-insurance and underinsurance inthe aftermath of a disaster● the effectiveness of recent federal and state
government measures designed to improveinsurance affordability in disaster prone regions● whether other measures, such as widespread
subsidies or an expanded government reinsurance
pool, for example to flood risk, is necessary to
improve insurance affordability and● options to increase home and contents insurance
affordability in disaster prone areas.

Recommendations
6.

Subsidise insurance in areas where it
is unaffordable
The Federal Government should trial subsidies forhome insurance in communities where insurance
is unaffordable for most people and particularly forpeople on low incomes.

7.

Microfinance insurance product trials
Governments should expand funding for trials of
microfinance insurance products to provide accessto insurance for people on lower incomes.

8.

Investigate affordability
The Federal Government should conduct an
independent review of the current and futureaffordability of home insurance, particularly forhouseholds on lower incomes in extreme weather
prone areas.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Improve access to hazard risk
information
We asked people if they knew about the risk when
they moved into their property“[We] owned the property since1987. We never discussed
flooding when we bought, I don’t
remember the flood ever being
talked about. It was more thedrought in my mind. We had water savings
during the drought.” Female, insured,
homeowner, regional Victoria, flooded in
2022.
“No — it was more than 30 years
ago since a damaging cyclone
came through the town. In thefirst few years from 1988 to 1999
there were a few small events,
mostly false alarms and people became
complacent. We became aware when
Cyclone Vance came through - prior to thatwe’d had “extreme” wind 150 kms per hourand rain. Vance’s wind was 300 kilometres
per hour and the epicentre was only 30 kms
away. We got clobbered by Vance.” Female,insured, homeowner. Her family has been
affected by Cyclone Vance (March 1999),
Olwyn (March 2015), and Quang (May 2015).

“[We] knew we were in a floodprone area but did not think ourproperty would flood as it had
not flooded before. We asked a
lot of people about flooding
before we bought, our house had never been
flooded even in 2017.
We were definitely aware of certain partsof Mullumbimby that flooded that we did notwant to buy - we thought our area was safer”
Couple with two young kids, insured, flood in
Mullumbimby NSW“Yes aware — I know it’s a floodzone, I had been living in South
Lismore already. We could only
afford to buy here and it waswhere our child was at school
and the other parent was at work. They are
putting lower socio-economic people at risk,
I bought the house for $170k in 2016 — it was
all I could afford.
Until you actually go through a flood you
don’t know how bad it is. I went in with a bitof ignorance, you can’t understand it until it
happens.
Now I can’t get another loan, even if I sell
to stay in the community, a lot of people arein the same position. There are few options
for me.” Mother and daughter, uninsured,
homeowner, South Lismore NSW, flood

People need better access to information about thecurrent and future exposure of their home to risk ofextreme weather events but this information is currently
difficult to find. The quality of information available fordifferent types of risks can also vary significantly, withinformation on flood risk being particularly difficult
to understand. This is typically published by local
government bodies to inform planning decisions but it
has not been developed with consumers in mind.
In the past, identifying a property’s risk to an insurable
natural hazard may have been an infrequent activity.
However, the worsening climate means that risks to
many properties have changed in recent years and willcontinue to change. Consumers need to understandthe consequences of this dynamic environment,
including how it can affect their home insurance
premiums. Access to timely information about evolving
risk exposure can also inform the mitigation measurespeople may undertake to lower their risk exposure.
Improved climate risk modelling is also important tounderstanding a property’s long-term risk profile when
deciding whether to purchase a home. Lenders require
home buyers to insure their homes over the lifetime of amortgage, and most people would expect to be able toobtain insurance throughout the life of the home loan.
Under responsible lending obligations, lenders must
not enter into a credit contract with a consumer if thecredit contract is unsuitable for the consumer and thecost of home insurance is typically considered whenassessing suitability. Better information about natural
hazard risks and future modeling of risks could be
used by lenders to more accurately estimate insurance
premiums for the term of the loan as part of their
responsible lending obligations.

We spoke with a mother and son living in the
Hawkesbury river region of NSW, their house islocated on a floodplain. They were aware that
there was some risk of flood when they purchased
the brick and timber house, but didn’t know how
bad it could get. She said:“We didn’t think the risk was that highand we couldn’t afford to live anywhere
else.”
They had been in the house for 9 years and had
lived through three separate floods, in March
2021, March 2022 and July 2022. She indicatedthat they bought the house on the understandingthat there was a one in a 100 year flood risk, which
she took to mean every 100 years she could be
flooded versus there being a 1% chance every
year of being flooded. The increase in floods hascaused a jump in her premium price:“My insurance, including flood cover,cost me $9,000 this year. I used some of
my last payout to pay for it, but I’m notsure if I can afford it next year.”
Like many others, their property’s value has
reduced significantly, leaving them trapped in an
unsellable home.

“Insurance is only guaranteed for one year ata time, but your loan might last 25-30 years.”Financial Rights Legal Centre

22

23

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEHow do consumers find out their level of risk?
People have to rely on piecemeal and inaccurate information about their property’s level of risk. The ASIC
Money Smart website encourages consumers to find out if their home is in a natural disaster-prone area by
contacting their insurance company, local council and state or territory emergency services organisation.
It is unclear what information an insurer can or will provide to their customers. The Insurance Council ofAustralia’s Understanding Insurance website directs consumers to their local government to obtain propertylevel information about flood risk. The Insurance Council of Australia states that governments are responsible
for assessing and mapping the flood risk to communities. It notes that:“Unfortunately, many parts of Australia that have flood risks lack adequate flood data or
have outdated flood maps. Most jurisdictions are working hard to improve the accuracy
and availability of their flood information.”19
Different jurisdictions have developed various consumer-facing tools to assist communities to understandgeneral flood, bushfire, cyclone and storm risks. In Queensland, people can access free property-level
Coastal Hazard Maps which show areas vulnerable to coastal erosion or permanent tidal inundation, as wellas the projected climate change impact to 2100. The NSW Rural Fire Service has an online tool to check if aproperty is in a bushfire prone area. CoastAdapt is an online tool that maps the impacts of sea-level rise forcoastal LGAs. Emergency services organisations will typically refer people to local government for propertylevel flood risk information.
There are some private Australian providers of climate risk information at a property level, such as Climate
Valuation which currently provides a Comprehensive Climate Impact Report for $45. The Climate Council’s
Climate Risk Map is an interactive map of climate vulnerable places in Australia at the postcode level.
While some of these sources of information are useful in some circumstances, the inconsistent andfragmented way in which they are produced means that it is very hard for most people to find the information
they need.

The community needs a single source of property
level risk information.
Consumers need to have access to accurate and timely
information about the natural hazard risks of theirhome. Governments should coordinate to develop a
National Hazard Risk Database that provides easily
understood, open access information about current andfuture climate risks to individual properties.
The general insurance industry has already partneredwith governments to develop the National Flood
Information Database for use by insurers in determining
the flood risk to individual properties. The database
contains 11.3 million addresses and is based on local
council mapping but it is not currently a public database.
As a starting point, the National Flood Information
Database should be made publicly available. People
should be able to easily look up their address andaccess information regarding the current and futurerisk to their homes, enabling them to make empowered
decisions. The National Flood Information Databaseshould also be regularly updated and could eventually
be included in a broader, National Hazard Risk
Database with data on the risk of cyclone, bushfire andcoastal erosion.
Many recent reports and inquiries, including the Royal
Commission, NSW Flood Inquiry and the Actuaries
Institute, have called for publicly available climate risk
modelling of natural hazards at the property level.
They have noted the significance of this information for
informed decision making about property transactions
and mitigation investments. The Productivity
Commission in 2014 found that many customers
underestimate, or are skeptical about, the risks they are
exposed to.20 Almost a decade later, the NSW Flood
Inquiry delivered a finding that:“Most landholders seem to have little idea if
their property is at risk of disaster or has everbeen affected previously by disaster.”

24

The property-level information contained in a National
Hazard Risk Database could be used to enhance
public awareness of natural hazard risks by:disclosing property-level natural hazard risks whenproperties are advertised for sale or rental● informing insurance decisions about property-level
exposure to natural weather events, particularlyflood● informing mortgage lenders’ assessments of likely
insurance costs over the life of a mortgage as partof their responsible lending obligations● communicating to insurance customers and people
who rent about changes in natural hazard risks totheir home over time●

Policymakers also need to test the best ways ofproviding and explaining this information to consumers.
The Royal Commission into National Natural Disaster
Arrangements recommended that governments
should develop ways in which natural hazard risk
information can be better communicated to the public— particularly to people who are making decisions thatwill affect their exposure to those risks. For example,
those selling a home might be required to disclose thistype of information to prospective purchasers.21

Recommendation
9. Build a single source of information on risk
to properties
Governments should work together to developa Hazard Risk Database that provides easily
understood, publicly available information on
current and future climate risks to individual
properties. This Database should include dataon the risk of floods, cyclones, bushfires andcoastal erosion.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Lower premiums by
reducing risks“[We] lived in the region a long time andthe house is surrounded by bush.
When we bought the house we were
not required to have sprinklers but weput them on to be safer, when we moved
in [there were] no fly screens [so we] had
to put them on to comply with bushfire
safety regulations.
We are always thinking about being
better prepared. Our fire sprinklers stayup all summer, now we keep them up
until [the] end of March or longer. We
keep clearing around the house, it's wellmaintained, short grass and fire resistant
plants like cacti. Fire risk and being
prepared are constantly on our minds.
[Our home] is straw bail, which is more
fire proof than double brick, and treatedwith fire retardant, rendered on theoutside with a Colorbond roof.
We have no trees within falling distanceof the house - they asked us about having
trees within 20 metres of the house.”
We spent $6000 to $8000 to get trees
removed - perhaps there should be a …
reward with a lower premium if they cut
down trees.”
Retired couple living in Wallagoot NSW,
their home was affected by the 20192020 Black Summer bushfires

Reducing risk, where possible, is a vital response toliving with more frequent and intense extreme weather.
Consumers need the resources and information to help
them understand what mitigation measures they can
implement to lower their risk profile. Many consumers
are already taking steps to reduce their risk, but few
report seeing a change in their premium.
People need clear guidance about the steps they
could take to reduce their exposure to insurable
weather events. These messages need to be simple
and actionable, with tangible benefits. Actively
involving communities in the dissemination of risk
mitigation information can also spread the burden ofknowledge across the whole community. For example,
after the 2011 Brisbane floods, the Yeronga Community
Centre was funded to help the local community
prepare for disasters and assist in the recovery
phase too.22
The Climate Council observed that property-level, risk
mitigation is occurring across Australia:“People will do stuff every year to manage
the fire risk around their property and a lotof that is not big investments… There is a
lot of stuff that people can do to reduce risk
significantly, but [they] do require some priorknowledge and a bit of work.”
There is considerable value in both community-leveland property-level risk mitigation. Resilient homes andcommunities will still be affected by extreme weather,
but their recovery will likely be quicker and cost less.
State governments have implemented the following
programs to assist disaster-affected and disasterprone regions to implement property-level mitigation
measures:● The Queensland and Federal Governments havedeveloped the $741 million Resilient Homes Fundto help Queenslanders across 39 local government
areas whose homes were impacted by the 20212022 floods. 23 Under the Resilient Homes Fund,funding is available to assist eligible flood-impacted
homeowners to repair (enhancing resilience),
retrofit or raise flood-affected homes. VoluntaryHome Buy-Backs will also be considered on acase-by-case basis.

26

27

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEThe NSW Government’s Resilient Homes Programis providing financial assistance to homeowners to
improve the flood-resilience of residential properties
in the Northern Rivers Region.24 It will offer eligible
homeowners one of the three available measures,
based on expert property assessments, flood impact
severity data, safety risks and potential future floodlevels: Home buybacks, home raising, or homeretrofit. The NSW Government also manages the
Resilient Lands Program with $100 million in funding
allocated to relocating homes to higher ground.
● The Queensland Government’s Household
Resilience Program provides funding to help eligible
homeowners in coastal parts of Queensland improve
the resilience of their homes against cyclones.
Homeowners who participated in the program
reported an average insurance premium reduction of
10.3%.25●

Key fact
The CSIRO has found that a $1 investment inclimate adaptation or disaster risk reduction saves
between $2 and $11 in post-disaster recovery andreconstruction.26

Helping households toreduce their risks
Insurers must consider any property-level
mitigation measures
People should be able to take simple steps to maketheir home more resilient and reduce their risks.
Insurers should be required to consider the impactof any measures that a person has taken to reducerisks when determining the price of a new or renewing
insurance policy, and should explain how this has
been assessed. This requirement should be reviewableby the Australian Financial Complaints Authority.
The insurance industry should work with consumer
stakeholders to develop tools, where necessary, forconsumers to easily verify mitigation works.
The National Emergency Management Agency(NEMA), through the Strategic Insurance Project,is leading the development of a national mitigation
measure knowledge base that will support households
to understand their risk and the actions they cantake to reduce risk.27 This project to develop anational mitigation measure knowledge base may
help to address this need. This may be preparatory
work to deliver on the Royal Commission (2020)
Recommendation 19.2 that the insurance industry,working with governments and stakeholders, should
produce and communicate to consumers clear
guidance on individual-level natural hazard risk
mitigation actions that insurers will recognise whensetting insurance premiums.
The ACCC has also previously called for insurers’
quotes and renewal notices to:● display what discounts have been applied (if any)
to reflect mitigation measures undertaken on thatproperty, and● include a schedule of mitigation measures whichcustomers in similar properties have undertaken
to improve their risk rating and a guide to thepremium reduction that consumers have received forundertaking these measures28
This important reform has yet to be adopted and would
provide greater clarity to people who wish to maketheir home more resilient to extreme weather events.

28

Rented homes must be resilient to extreme
weather events
People who rent deserve to live in resilient, safe, andhealthy homes. However, many people who rent live inhomes that are exposed or poorly adapted to the risksof extreme weather events. Renters are often unable
to make meaningful adaptations to make their homes
more resilient.
State and territory governments should modernise
residential tenancies legislation to require landlords totake reasonable steps to make rented homes resilient
to climate risks. Resilience should be considered aminimum habitability standard for all rental homes inAustralia. For example, possible resilience changes
could include upgrading roofing and windows with fire
resistant materials, lifting the height of power sockets
or waterproofing exterior walls. These requirements
could be phased in over time to allow landlords time to
implement improvements.
Homeowners on lower incomes should be supported
to make their homes more resilient
Many homeowners will not have the financial means
to invest in risk mitigation measures. In some cases,
financial assistance will be needed to undertake costeffective retrofits to make housing more resilient.
Financial assistance will need to be tailored to theneeds of different groups including private renters,
community housing and owner-occupiers.
Households on lower incomes should be empowered
to make changes which make their home more
resilient to climate risks. The Federal Government isinvesting in community-level mitigation through its
Disaster Ready Fund which provides up to $200 million
annually to build disaster resilience and mitigation
projects across Australia29 but this fund is not currently
available to support property-level mitigation. If just
5% of the Disaster Ready Fund were set aside for thispurpose, $10 million could be available annually to help
owners reduce their risk exposure in highly exposed
communities.

property level assessments for any homes damaged
in the 2022 floods.30 This opt-in program provides
homeowners with a free, detailed assessment report,
including a comprehensive scope of repair works andan estimate of repair costs. This type of service should
be available for other households struggling withinsurance affordability.

Recommendations
10. Ensure that people are rewarded for taking
steps to mitigate risks to their properties
Insurers should be required to consider relevant
property-level mitigation measures in any new orrenewing insurance policy, and to demonstrate
how those measures have been reasonablyreflected in the proposed premium. Governments
and insurers should provide advice on mitigation
measures that people could take and provide freeassessments for people who have undertaken
mitigation on their homes.
11. New obligations for rented homes to be more
resilientState and territory governments should amend
residential tenancy laws to require landlords totake reasonable steps to make rented homes
resilient to climate risks.
12. Allocate financial assistance for mitigation
measures
Governments should allocate sufficient funding toassist property owners on low incomes and social
housing providers in disaster-prone regions toundertake approved, cost-effective property-level
mitigation measures.

Governments should make free property assessments
available to homeowners on lower incomes torecommend mitigation measures. For example, the
NSW Resilient Homes Program has included free29

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Help people to leave
dangerously exposed housing
Acutely exposed properties are likely to require
solutions beyond insurance. Recent extreme weather
events have demonstrated that some existing housing
stock, for example in the northern NSW flood plains,
is no longer insurable or, more importantly, safe.
Some parts of these communities have hit the limits
on mitigation as a solution to remaining in a safe andinsurable home. A number of communities in northern
NSW and Southern Queensland, working with local
and state governments, have started the difficult
process of managing and planning their retreat fromunsafe and uninsurable locations.

30

Living in dangerously exposed housing can havelasting social and economic impacts on households.
An individual from Windsor NSW, whose home wasaffected by floods in 2020, 2021 and 2022, sharedwith us:“I’d never buy in a flood prone area again,
when you go through it, it’s traumatic, it takesa mental toll… My tolerance has gone after 3
floods, so has my marriage”.
Participants shared with us the impact that extreme
weather events had on their mental health, homes
and communities. Many spoke about living with posttraumatic stress disorder and hypervigilance, andreported higher levels of anxiety in their children.
Some participants shared that they are struggling withisolation as neighbours have left their damaged homes,
or moved out of town altogether as the risk of future

events is too high. A retiree, living in Rochester Victoria,
whose home was affected by floods in 2022, shared:“I feel very isolated in town now. At the endof the street there were always cars, andpeople walking. It’s not like that anymore,because people have left town. When I go up
the street, the shops are shut and won’t bereopening, local merchants are struggling.
I find it depressing and gloomy. There is
nobody here to connect with”.
As extreme weather events become more frequentand intense, and affect new areas, more people will
likely find themselves in uninsurable and potentiallyunsellable properties. The Climate Council has forecast
that by 2030, 4% of properties (1 in 25 properties) willbe ‘high risk’ and uninsurable, with projected annual
damage costs equivalent to 1% or more of the property

replacement cost.31 Proactive government measures
are needed to move people out of harm’s way. Thisis likely to involve targeted buybacks and will require
careful and human-centered conversations with
communities, especially First Nations peoples.
In areas where mitigation and adaptation systems
cannot adequately or economically manage the losses
suffered from persistent severe weather events andrising sea levels, there is increasing recognition that
communities need to consider relocating some or all of
their people and assets.
It is also vital that all levels of government work
together to prevent future developments that put
people in harm’s way. This will require a concerted
effort to model climate risks and adopt approaches
to land use planning to prevent new developments inhigh-risk areas.

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WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE

Reforms to assist people in
exposed housing
National Cabinet should agree upon a consistent
approach to planned relocation
While retrofitting and measures like raising homes play
an important role in protecting some people from risk,
relocations and buybacks need to be considered forpeople that live in highly exposed areas. Coordination
will need to occur across all governments to identify
the areas most at risk and plan, in consultation with
communities, to move them to safer areas.
Community relocation due to natural hazard risk is
not a new concept in Australia. Gundagai in New
South Wales and Clermont in Queensland provide two
historical examples of townships that were relocatedafter floods as both towns experienced severe lossof life.32 In Gundagai, 89 people out of a populationof 250 drowned in May 1851 (Australia’s worst-everflood in terms of loss of life) and 64 people drownedin Clermont on 28 December 1916.33 Following
devastating flash floods that resulted in the death of 12
people in Grantham, Queensland in January 2011, local
council implemented a voluntary land-swap scheme torelocate residents from the floodplain to higher groundand as of July 2013, 115 households had signed up to
relocate to the new Grantham.34

As these examples illustrate, relocations have typically
only occurred in the aftermath of devastating events.
Governments must instead take a proactive approach toprotecting communities in areas exposed to high risk.
Natural disasters cost Australia an average of $38
billion a year35 and have a devastating impact on themental health of people affected. Planned relocations
and buybacks will help prevent future harm, taking
people out of the path of natural disasters and lowering
the cost of recovery for clean up, emergency services
and rebuilding of infrastructure
Recognising that relocation and buybacks require
coordination across all levels of government, National
Cabinet should agree on a consistent frameworkfor planned relocation. This could be modelled on
the recent IAG and Rhelm report.36 IAG and Rhelm
recommended that a national strategy should cover:
Key objectives and performance indicators forPlanned Relocation Schemes.
● Models for Planned Relocation (e.g. buy-back andcommunity relocation).
● Guidance on the planning, decision-making,implementation, and integration phases.
● Models for holistic community engagement,
including specific considerations for First Nations
People.
● Consideration of vulnerable community members,
including people with a disability and the elderly.
● Guidance on land use planning and management,
including the management of vacated land.
●

Governments need to provide funding forcommunity-led conversations
Governments should commit targeted funding toenable community consultations about how to respondto natural hazard risks in dangerously exposed
communities. Community centered consultation forpeople living in extremely exposed areas, before,
during and after disasters, can help to reduce theconfusion and stress that people typically experience.
Governments involving communities in decision
making will empower them and create better outcomesthat reflect their needs and expectations.

32

Currently, community engagement is occurring onan adhoc basis, largely dependent on the strengthof individual communities and local governments
within the confines of existing programs such as
the Queensland Resilient Homes fund and the New
South Wales Resilient Homes Program. A consistent
approach across Australia should be adopted withadequate funding to identify communities most at risk
from natural disasters and involve them directly in thedecisions being made about their future.
Consumer advocates consider the Queensland’s
Resilient Homes Fund as an effective example ofgovernments supporting people in extremely exposed
communities. The fund is a pool of $741 million available
to Queenslanders in 39 local government areas whose
homes were affected by the floods of 2021-22. It gives
eligible homeowners the options to repair, retrofit, raiseor demolish their home. For the most severely impacted
people, who remain at a high risk of future flooding,there is also an option for a voluntary home buyback.
As of late June 2023, 800 homes were deemed eligible
for the buyback program, 370 offers had been acceptedby homeowners and 238 homes were sold.37
The Resilient Homes Fund also involves local
government in the management of the buyback scheme.
Coordination across all levels of government is importantin providing affected people with the support to recoverand be more resilient for future extreme weather
disasters. Appropriate community consultation is being
undertaken to ensure people have their voices heard,
understand their level of risk and are aware of theiroptions. This model could be expanded across Australia
in communities which are in exposed communities.

Recommendations
13. Plan for relocation of communities at high risk
National Cabinet should agree on a clear andconsistent approach to supporting relocationof communities that face high risk of natural
disasters.
14. Fund community engagement
Governments should provide funding fordangerously exposed communities to undertake
consultations about ways to mitigate future risk,
including the possibility of relocation.

33

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATEMETHODOLOGY
Policy research
We contracted Elissa Freeman of Elissa Freeman
Consulting to prepare a policy paper for this report.
This paper draws on the wealth of research andinvestigations published by independent commissionsof inquiry, regulators, industry participants andacademics. A stakeholder roundtable was held on
26 May 2023 and stakeholder interviews wereconducted with:● Australian Council of Social Services● CHOICE● Climate Council● Consumer Action Law Centre● Federation of Community Legal Centres (Victoria)● Financial Counselling Australia● Financial Rights Legal Centre● Good Shepherd● Legal Aid NSW● Tenants’ Union of NSW

Quantitative research
In June 2023, CHOICE conducted a nationally
representative survey of home insurance policyholders(n = 1037).38 This research measured consumer
understanding of home and contents insurance,
and asked people if they thought they had enoughinsurance to recover after an extreme weather
event. The survey also asked consumers about theirexperiences of insurance affordability and any risk
mitigation measures they have taken.

Social research
We commissioned Bartley Consulting to interview asample of 21 homeowners and renters to understandconsumers’ experience of the home and contents
insurance market during and following extreme
weather events. We were primarily responsible forrecruiting participants, with support from Bartley
Consulting. The participants from around Australia
had experienced a range of extreme weather events,
although most commonly they were flood affected. We
were interested in the experiences and perspectives ofboth homeowners and renters: most participants were
homeowners (n=15) and a proportion (n=6) were people
who rent.

Scope
This report investigated the experience of home andcontents insurance and extreme weather for people
who own and rent their homes. This report does not
explore landlord, strata, life or vehicle insurance or theclaims handling process.
Throughout this report we refer to ‘natural disasters’‘natural hazards’ and ‘extreme weather’. We use theseterms interchangeably to refer to floods, bushfires,storms, cyclones, coastal erosion, droughts, hail andexcessive rainfall. We recognise that these events are
becoming more frequent and severe as a direct resultof human induced climate change.

Mental Health support
If this report has raised issues for you, there is help
available:
Beyond Blue 1300 224 636
Lifeline 13 11 14
NSW Mental Health Line 1800 011 511
Suicide Call Back Service 1300 659 467
National Debt Helpline 1800 007 007

Endnotes
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34

Insurance Council of Australia, News Release; Three year weather bill reaches $12.3 billion, 30 November 2022
CHOICE Insurance Premium research is based on a survey of 837 Australians that have home and contents insurance. Quotas were applied for
representations in each age group as well as genders and location to ensure coverage in each state and territory across metropolitan and regional
areas. Fieldwork was conducted from March 29th to April 19th 2023. The survey was designed and analysed by CHOICE with fieldwork provided by The
ORU. The ORU are ISO 20252 and 26362 accredited and are full AMSRO members.
CHOICE Impact of Climate Crisis on Insurance research is based on a survey of 1,037 Australians that have home and contents insurance. Quotas wereapplied for representations in each age group as well as genders and location to ensure coverage in each state and territory across metropolitan andregional areas. Fieldwork was conducted from the 15th to the 30th of June, 2023. The survey was designed and analysed by CHOICE with fieldwork
provided by The ORU. The ORU are ISO 20252 and 26362 accredited and are full AMSRO members.
Financial Rights Legal Centre, 2022, Exposed: Insurance problems after extreme weather events, https://financialrights.org.au/publication/exposedinsurance-problems-after-extreme-weather-events/
Stephen Jones, 2022, Landmark funding to help reduce insurance costs, joint media release https://ministers.treasury.gov.au/ministers/stephenjones-2022/media-releases/landmark-funding-help-reduce-insurance-costs
Insurance Contracts Act 1984, ss. 35(2)Monash University, 2018, (In)effective Disclosure: An experimental study of consumers purchasing home contents insurance https://financialrights.org.
au/wp-content/uploads/2018/09/InEffectiveDisclosure-final_embargoed-until-17-Sep.pdf
CHOICE Impact of Climate Crisis on Insurance research is based on a survey of 1,037 Australians that have home and contents insurance. Quotas wereapplied for representations in each age group as well as genders and location to ensure coverage in each state and territory across metropolitan andregional areas. Fieldwork was conducted from the 15th to the 30th of June, 2023. The survey was designed and analysed by CHOICE with fieldwork
provided by The ORU. The ORU are ISO 20252 and 26362 accredited and are full AMSRO members.
CHOICE Impact of Climate Crisis on Insurance research is based on a survey of 1,037 Australians that have home and contents insurance. Quotas wereapplied for representations in each age group as well as genders and location to ensure coverage in each state and territory across metropolitan andregional areas. Fieldwork was conducted from the 15th to the 30th of June, 2023. The survey was designed and analysed by CHOICE with fieldwork
provided by The ORU. The ORU are ISO 20252 and 26362 accredited and are full AMSRO members.
Australian Competition and Consumer Commission, 2020, Northern Australia Insurance Inquiry – Final Report, Canberra
Royal Commission into National Natural Disaster Arrangements, 2020, Report, p.32, Canberra
Financial Rights Legal Centre, 2022, Exposed: Insurance problems after extreme weather events, https://financialrights.org.au/publication/exposedinsurance-problems-after-extreme-weather-events/
Australian Competition and Consumer Commission, 2020, Northern Australia Insurance Inquiry – Final Report, Canberra
Actuaries Institute, 2022, Home insurance affordability and socioeconomic equity in a changing climate, Green Paper
South Australian Council of Social Service, 2022, Protecting the Basics: Insurance access for people on low incomes at risk from climate emergencies
https://www.sacoss.org.au/sites/default/files/Embargoed_SACOSS%20Insurance%20Final%20report.pdf
Climate Council, 2022, Uninsurable Nation: Australia’s most climate-vulnerable places https://www.climatecouncil.org.au/wp-content/
uploads/2022/05/CC_Report-Uninsurable-Nation_V5-FA_Low_Res_Single.pdf
Australian Competition and Consumer Commission, 2020, Northern Australia Insurance Inquiry – Final Report, Canberra
Australian Competition and Consumer Commission, 2020, Northern Australia Insurance Inquiry – Final Report, Canberra
Insurance Council of Australia, 2023, Understanding Insurance - Flood insurance https://understandinsurance.com.au/types-of-insurance/floodinsurance
NSW Floods Inquiry, 2022, Volume Two: Full report, Sydney
Actuaries Institute, 2022, Home insurance affordability and socioeconomic equity in a changing climate, Green Paper
Productivity Commission, 2014, Natural Disaster Funding Arrangements, Inquiry Report no. 74, Canberra
Productivity Commission, 2014, Natural Disaster Funding Arrangements, Inquiry Report no. 74, Canberra
Royal Commission into National Natural Disaster Arrangements, 2020, Report, p.32, Canberra
Yeronga Community Centre, 2023, https://communityplus.org.au/yeronga-community-centre/
Queensland Government, About the Resilient Homes Fund, https://www.qld.gov.au/housing/buying-owning-home/financial-help-concessions/resilienthomes-fund/overview/about
NSW Government, Resilient Homes, https://www.nsw.gov.au/regional-nsw/northern-rivers-reconstruction-corporation/resilient-homes-fund
Joint statement, 3 June 2023, Building a resilient Queensland spirit: stronger, safer, more affordable regional homes, https://statements.qld.gov.au/statements/97855
Royal Commission into National Natural Disaster Arrangements, 2020, Report, p.406, Canberra
National Emergency Management Agency, https://nema.gov.au/programs/hazards-insurance-partnership
Australian Competition and Consumer Commission, 2020, Northern Australia Insurance Inquiry – Final Report, Canberra
National Emergency Management Agency, Disaster Ready Fund, https://nema.gov.au/programs/disaster-ready-fund
NSW Government, Department of Customer Service, 2023, The Flood Property Assessment Program https://www.nsw.gov.au/emergency/floods/
financial-support/property-assessment-faqs#toc-what-is-the-flood-property-assessment-program
Climate Council, 2022, Uninsurable Nation: Australia’s most climate-vulnerable places https://www.climatecouncil.org.au/wp-content/
uploads/2022/05/CC_Report-Uninsurable-Nation_V5-FA_Low_Res_Single.pdf
King, D, Bird, D, Haynes, K, Boon, H, Cottrell, A, Millar, J, & Thomas, M, 2014, Voluntary relocation as an adaptation strategy to extreme weather events.
International Journal of Disaster Risk Reduction, 8, 83-90
ibid
ibid
Deloitte, Special report: Update to the economic costs of natural disasters in Australia, Australian Business Roundtable for Disaster Resilience & Safer
Communities, 2021 https://www2.deloitte.com/au/en/pages/economics/articles/building-australias-natural-disaster-resilience.html
IAG & Rhelm, 2023, Planned Relocation Protecting our communities https://www.iag.com.au/sites/default/files/Documents/About%20us/Final%20
report_0.pdf
Joint Media release, 2023, More Queensland homes to benefit from voluntary buybacks, https://statements.qld.gov.au/statements/97972
CHOICE Impact of Climate Crisis on Insurance research is based on a survey of 1,037 home and contents insurance policyholders. Fieldwork was
conducted from the 15th to the 30th of June, 2023.

35

WEATHERING THE STORM: INSURANCE IN A CHANGING CLIMATE36