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The Insurance Council of Australia (ICA) has commissioned a study from the McKell Institute, The Cost of Extreme Weather, which revealed that Australians are paying $1,532 on average due to extreme weather.
Over the last 10 years, the average annual household cost of extreme weather has been $888, however that figure is expected to increase to more than $2,500 a year by 2050.
The rise in the average household cost across 2021–22 is largely attributable to the cost of the record-breaking February–March floods. Included in the costs are government expenses paid for taxes, insurance costs, uninsured damage and increased prices due to supply chain shortages.
The report alongside the ICA’s second Insurance Catastrophe Resilience Report, which uses insurer data and insights to review the 12 months of extreme weather events, advocates changes to reduce the impact of future weather events.
Key findings from the reports include:
- Since 2005, Commonwealth expenditure on disaster relief was $24 billion while disaster resilience expenditure was $500 million, 2 per cent of all expenditure.
- Australian households are expected to be paying around $35.24 billion (disregarding inflation) every year for direct costs of extreme weather by 2050.
- Insurers paid $6.41 billion from more than 380,000 claims across multiple events in 2021–22, an increase from $3.9 billion when compared to the 12 months preceding.
- The February–March floods are the costliest natural disaster in Australian history, reaching $5.28 billion in insured losses.
- Brisbane suffered the greatest loss from this year’s floods, at $1.38 billion, followed by Lismore at $508 billion.
- Incurred losses per adult were $20,000 for Lismore, compared to $1,500 for Brisbane.
- Claims for Lismore, Ballina, both Byron and Richmond Valley and Brisbane averaged around $80,000, $64,000, $50,000 and $30,000 respectively.
The ICA’s resilience report examined how climate change is impacting the availability and affordability of insurance in areas that experience worse weather conditions, along with looking at insurers’ community engagement following extreme weather events and how communities are responding/recovering.
ICA chief executive Andrew Hall stated the ICA’s report “clearly shows” that the impacts of climate change are being felt presently.
“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,” Mr Hall said.
“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.”
Mr Hall further stated that while progress is being made by the Albanese government, which introduced a legislation to invest $200 million per annum into “resilience measures” through the Disaster Ready fund, states and territories must also “do their bit” to match this funding and protect communities from worsening weather events.
McKell Institute CEO Michael Buckland stated: “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 federal government extended its funding to support an additional eight regions that were heavily affected by weather conditions in July 2022.
[RELATED: Government flood supported expanded]
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