It’s taken a long time, but Australians are catching on that climate change is coming for their homes, vehicles and other assets — if not their lives.
Forget Chinese warships on the geopolitical horizon, this invasion force is already here: increasingly frequent and destructive natural disasters bringing battalions of gale-force winds, deluge-driven floods, storm surges, bushfires and blistering heat. Most insidiously, however, this multibillion-dollar trend can blow up the household or business budget before a disaster even strikes, regardless of how severe an individual event turns out to be.
The mechanism for this is insurance premiums, which have become one of the biggest and stickiest items keeping inflation higher, thus keeping interest rates higher. Insurance price rises keep hitting the hip pockets of all Australians in the build-up to what remains overwhelmingly a “cost-of-living election” because the surging impacts and future liabilities of natural disasters are being priced in by insurers.
Air grievances
That’s the business insurers are in, pricing risk, and it’s never going to be popular. For those who get targeted with the highest premium rises or are red-lined from getting insurance altogether, this can be devastating. Research published by The Australia Institute last week found that nearly one in five households are uninsured or underinsured, with a growing number facing “extreme home insurance affordability pressure”, putting most of their personal wealth at risk.
Now, with uncanny political timing and portents, a cyclone has blasted the climate and its insurance implications, immediate and longer-term, back into the national consciousness.
Cyclone Anthony … er Alfred
Nearly three weeks ago, an emerging cyclone scheduled to be called Anthony had its name changed to Alfred by the Bureau of Meteorology out of respect for Prime Minister Anthony Albanese.
At one stage in its erratic, slow-moving path, Alfred could have just drifted south into the Tasman Sea, perhaps ending up as one of New Zealand’s infamous “weather bombs”, which drive insurance pressures for Kiwis too. But complex oceanic weather patterns intervened, turning Alfred into a very politicised storm for Australia. A week ago it took a hard-right turn towards the two million-plus people packed into Queensland’s south-east corner — the Sunshine Coast, the greater Brisbane metropolis and the Gold Coast.
In rapid succession, the now ex-cyclone Alfred’s political impacts started to mount up. First off, it blew up Opposition Leader Peter Dutton’s election fundraising week with the big end of town. Two Melbourne events were quickly cancelled as a result of Liberal Party red faces over Dutton leaving sandbag-packing Brisbane midweek to party at a Sydney billionaire’s harbourside mansion.
This also largely shut down Dutton offering further gratuitous advice to the PM on how he should abandon any plans for an election announcement, lest he show a “tin ear” for the concerns of everyday Australians in the path of a looming disaster.
Alfred resets election schedule
Then, political pundits insist, it blew up Albanese’s plans for an April 12 election, which had to be announced by today at the lastest, pushing a polling day off into May, with date options of Saturday May 3, 10 or 17.
The delay is a big deal, although its implications remain uncertain because it denied Albanese the opportunity to head for the polls off the back of the big Labor win at the weekend in the West Australian state election. It also forces federal Labor to deliver its 2025 budget on March 25, feeding into unwanted scrutiny of its economic performance and forecasts, although on the flip side it also opens a door to more forensic attention on Dutton’s budget-in-reply speech .
Most tellingly, the cyclone has put climate back on the political agenda, with a cost-of-living angle courtesy of insurance. Because with the same level of certainty as death and taxes, after every storm comes the clean up and the insurance claims, and the arguments about those claims and who’s missing out.
Even if not scientifically proved, people (aka voters) tend to associate big storms and big fires with the climate crisis, especially when the disaster appears unusual, such as a “tropical cyclone” turning up near Brisbane when they mainly range much further north in Queensland’s tropics.
Misfortune vs fortunes
Alfred also has citizens and the media recalling former PM Scott Morrison’s disastrous decision to holiday in Hawaii while the nation burned in the 2019-20 bushfires, and his infamous “I don’t hold a hose, mate” riposte, the celebrated gaffe which contributed to his 2022 election loss. Now that Albanaese is facing his own disaster-impacted re-election moment, he’s desperate to handle Alfred and its aftermath flawlessly, milking the man-of-action visibility it provides him as PM on the spot.
Of such things are political fortunes made. If Dutton is ever inclined to get on his knees and pray to Australia’s mythical weather god Huey, he would never have asked for a cyclone ending up near his home north-west of Brisbane.
Extreme summer heatwaves across the populous and electorally crucial southern states of NSW and Victoria would have been far better from the perspective of Coalition political prognostications. The dream scenario was massive electricity blackouts as the masses turned up the cooling on the aircon on heatwave afternoons, which could then be blamed on “reckless renewables” and greenie-sympathising Labor government incompetence.
A cyclone, by contrast, is too unpredictable, too demonstrably “natural”, and too readily associated with climate by voters. At one stage nearly half a million homes in south-east Queensland and north-eastern NSW had their power cut off by Alfred’s wind and rain, and none of that could be used against renewables, or any level of government.
The heat is on
Alfred was quickly declared an “insurance catastrophe” by the insurance industry, with 3,000-plus early claims recorded, and many more to come with widespread damage, flooding and evacuations continuing into Monday.
Dutton and the Coalition, meanwhile, have been in a spin over how they’d tackle rising insurance costs as a key measure to counter cost-of-living pressures, while avoiding honestly associating it with the very real consequences of the climate crisis.
In February, triggered by catastrophic floods in north Queensland, Dutton floated the idea of forcing the break-up of big insurers to protect consumers from being “ripped off”. This is similar to what the Coalition has threatened, in a populist policy ploy, to inflict on recalcitrant supermarket mega-chains that fail to keep prices down down down. But just last week opposition shadow treasurer Angus Taylor appeared to walk back the threat to break-up insurance companies, in an interview on Sky News Australia no less.
The truth is that the growing impact of the climate crisis on insurance costs and availability is a GFC-scale (or greater) threat hanging over Australian and global economies. Neither Labor nor the Liberal-National coalition want this to be focused on too deeply at the election, although the Greens and teals are more ready to dial it up, while One Nation denies it exists.
A day of reckoning is coming, and rising insurance premiums are the increasingly noisy canary.
What it should have been called was ‘Cyclone Dutton’!!! Not least because of the Liberal and National Parties’ total obstinacy in accepting that climate change is a reality that we have to live with. I share Matt Kean’s frustrations with the stupidity of their denials. ‘Deliberately obstructionist is how Kean describes those who oppose any actions aimed at accepting the realities of climate change.
Wat is really sad is that the mainstream media keeps giving Dutton and his deniers more airtime, when they should be ignoring them or at least calling them out for denying the truth.
The situation is going to keep getting worse, not better.
Well said.
A class action against fossil fuel companies. Dutton is just one of their employees.
It’s about time all of the lies from the opposition regarding our climate crisis, coupled with Big Mining interests are bought to heal and are judged by their peers and made to pay for their ignorance and greed.
A class action against fossil fuel companies. Dutton is just one of their employees.
Dutton and his pie in the sky buddies have set us back 10 years. Well said.
It’s wrong to say Insurance companies price in risk, they price in profits. I live in Townsville in an apartment building that has avoided anything more than minor damage over the 17 years I’ve lived in it. Our insurance premiums quadrupled between about 2015 and 2022 because we are compelled to take out insurance and over that period there was only one provider in North Qld so they charged what they wanted. A second provider arrived two years ago and our premiums have now halved. That’s not a calculation based on risk, nor the growing risk of climate change. But where is the consumer watchdog who should be protecting us all from what is clearly predatory pricing. The costs of climate change are real, but the costs of a lack of competition, a lack of ethical business practices, and lack of regulatory oversight are higher.
If only there was a way of reducing premiums and spreading the risk in a not-for-profit model!!
Oh wait! It was called the QLD State Government Insurance Office which was flogged off in 1985 and with it went the diverging philosophies of fair risk assessment over profit.
I am originally from FNQ.
Our household insurance policy in Brisbane ( we live on the top of a hill) went up bu 300%.
And so, although your insurance has become reasonable, please remember that the Body Corporation may have reduced what it has the building insured for.
The Council of Owners should have the building insured at replacement cost.
Cyclone and floods in QLD are a real focus point for the population. Labor should announce a Federal Review of how this Insurance works and consider alternate models. Mind you having been flooded in Brisbane and the Sunny Coast this Insurance is till so much better value than Private Health Insurance which is extremely expensive and low value for money with so much out of pocket expenses still to pay.
This is all part of the system, our economies are based on FIRE: finance, insurance and real estate and extractive industries as we have barely any manufacturing anymore thanks to Hawke Keating and the neoliberal policies of all following governments particularly Liberal governments. The insurance industry is a profit scam as Mark stated, if one changes company for a cheaper policy the following year or the next the policy jumps 20 to 25% but then you threaten to change companies and miraculous a large discount is offered. So the moral to the story is change your insurer regularly and shop around for a fair price and haggle at policy renewal time.
Steven Jackson has clearly forgotten that it was Joe Hockey who closed the motor manufacturing industry down. How could anyone forget hearing Mr Hockey boast about his achievement and how much this has saved the government in subsidies?
I thought that “…and the neoliberal policies of all following governments particularly Liberal governments.” rather covered that.
All good assuming the lowest premium does not price you out of the market. Insurance is a business and so profit is going to be their main concern, but the reality is that climate change is massively increasing the number and size of the claims they pay out on. The profitability of the industry is now a second order concern. Having fair prices doesn’t help if you cannot afford them.
We did exactly that,. and looked for a cheaper company then when it was renewal time we had to pay a lot more. Did not have time to look around and what my partner found is that they were all wanting to insure us for too much considering the type of residence but we could not change it. We will look around when it is up again and hopefully we get somewhere.
I wouldn’t worry about the value of a private health insurance policy unless you are chronically ill, likely to have a heart attack or need a hip or knee or eyes surgery. Then the value of the policy becomes the difference between pain and incapacity and not.
I worked for one of the big insurers during the noughties. While I agree that they focus on profit, they are also beholden to the reinsurers.
But what I want to say here is that during the time I worked there they were doing modelling of what the impacts of the climate crisis would be on SE Qld, including that it was inevitable that at some time in the relatively near future a cyclone would cross the coast just north of the NSW border, exactly as Alfred (nee Anthony) has done, with the now evident impacts. They lobbied the federal and state governments back then for more action towards working to avoid this scenario, but despite all the modelling and evidence they were ignored.
I guess my point is that there was a time when the insurers (at least the one I worked for) were working to highlight the increased risks of a lack of action on climate change, and recommending mitigations for possible avoidance. Maybe they are still doing this…
But again, I agree that profit is their primary focus…
Let’s hope that this latest “climate disaster” & the focus on insurance is an opportunity for politicians to listen to insurance companies whose profits are based on predicting risk. If you want the truth about our climate future, insurance companies have all the stat’s you want.
Are we listening yet?
Yes, reinsurance is only part of the problem and from what I can remember there are only two that I know of SwissRe and Lloyds, and those investors dislike paying out!
There was a time when you bought insurance that you had a PDS, they were lengthly things, and you knew what you were buying more or less if you bothered to read it, not now, those risks have been passed onto the consumer as it seems to me you are buying a contract without the relevant disclosure details.
Surely the bold response here would be to nationalise insurance? It is a public good par excellence, utterly unfit for profit-making. Let’s have an insurance levy, progressive of course, and a public fund for reconstruction and support. The insurance industry warned us decades ago that they could not cover the risk.
Agree with the last commenter. Insurance works where there is a small risk of a catastrophic event. As Climate Change fuelled disasters increase, insurance is paying for increasingly likely outcomes and is becoming unviable. You might as well just save up via a levy to pay for whatever you are going to pay. But even Governments will be unable to cover all the costs in time. Maybe this will spur some action on Climate Change but of course Australia alone wont have much effect
I really don’t like the refrain that Australia’s actions have little impact compared to other big greenhouse emitters. That seems to imply Australia can just sit on its hands and let the lifting be performed by others. By “others” the inference tends to be China, the powerhouse of greenhouse emissions.
The little known news is that China’s greenhouse emissions have peaked and are now trending down. China has already surpassed their renewable energy target of 1200 GW by 2030, last July. They have another ~400 GW of renewable energy plants in the works. Australia cannot wash its hands of its responsibility. Greenhouse gas emissions take decades to build up, it did not just materialise in the last ten years. Up until the 1950s Australia generated more greenhouse gases than China. It’s only from 1960 that China’s greenhouse started to exceed Australia’s in any meaningful way. From circa 1980, there was massive industrialisation in China as companies in the western world including Australia moved their manufacturing to China to take advantage of the cheap labour there. It is that fact that has resulted in China becoming the world’s biggest greenhouse gas emitter. All those factories need power. Australia is complicit in causing that. Despite China’s heavy emissions, believe it or not, on a per capita basis, Australia emits more greenhouse gases than China by about 50% per more per person. See ourwordindata.org.
Morally, ethically, and for the sake of our future generations, Australia needs to pull its weight and do its part in helping to reduce greenhouse gas emissions.
It’s not just insurance that affects cost of living from climate change. Wastes dumped as greenhouse gas emissions into the atmosphere increase the temperature of the atmosphere, the land and oceans. This leads to more droughts and more cyclones, hence more flooding, also fires, so there is less land for growing crops and grazing animals. This must add to the cost of living.
Gordon Ratray Taylor’s “The Doomsday Book” was published in 1970 , only 55 years ago, and though so close to the mark in his science based predictions he was thought to be too rat-baggish to be taken seriously. He said the ocean temperatures were the drivers of climate, and they are, and when that rose climate change was inevitable. And it is. The love affair that governments have with stamp duty, the promise Howard made to have it abolished when we agreed to the GST, is incentive enough to leave it alone. Insurance fraud has been the white ant in the system with unscrupulous consumers milking the system for their own benefit and suppliers jacking up their prices with “Are you insured?” being the precursor of quoting. Having an ‘excess’ clause in policies which the consumer can pay higher to get a ‘discount’ is an effort to decrease ’white anting.’ Unlike health insurance, where everyone has a similar chance of falling ill or being knocked over by a bus, consumers with property in very low risk categories pay insurance premium rises to offset the claims of property owners in high risk situations, like bushfires and floods. Because insurance is a worldwide industry we can expect further rate rises because of fires in California, and cyclone Alfred. There is a cooperatively owned model that if you could find a thousand totally honest friends in low risk areas who paid half their current insurance premium of $4000 you would have $25m in the pool after just 5 years after allowing $1m per year in claims and administration, and didn’t spend tens of millions of dollars every year on advertising and office skyscrapers and eye watering salaries. Finding a thousand honest friends may be the problem. Google ‘Sir Justin Hickey,’ amazing insurance story.
Our uninspiring Premier Mr Crisafulli intially said that Alfred coming so far South was “Not exceptional” ie dogwhistle for it is not associated with Anthropogenic Climate Change. Yep a few things have changed since 1954 when the last cyclone hit Brisbane, rising sea temperatures being one of them.
Who do they govern for, the people or the mining industry?
We shouldn’t be calling these increases in insurance premiums inflation. They are increasing because the risk profile has changed and we are now buying a different, more expensive product. the cost of rebuilding a house hasn’t gone up much more than inflation but climate change is resulting a lot more houses needing to be rebuilt and repaired so that is causing prices to go up (there may well be some profiteering as well). The premium increases should not be included in the inflation calculations that the Reserve Bank uses to set interest rates because no amount if interest rate increase is going to bring these premiums down. The only way they will come down is if end green house emissions and stop climate change.
Just last week my sister was pointing out the huge wastage that occurred in the refit of her house after the Gympie floods of a couple of years ago. About 15cm of water entered the ground floor of the house, for the first time in the 40+ years they have lived there, damaging some carpeting and the gyprock walls in 3 rooms. When the cowboys – her words – sent by CBA came to repair it they completely gutted the whole ground floor, including expensive bathroom and laundry fittings, literally tearing things out with crowbars and sledge hammers, rendering it all unusable. This turned a job worth a couple of thousand dollars into one valued well in excess of a hundred thousand. It was obviously done so that the contractor could gouge every cent they could from CBA, who blithely tried to pass on the expense by doubling their premium. My sister rightly kicked up a stink, and now has been blackballed by CBA. If the insurance companies did their due diligence when awarding contracts I’m sure tens of millions of dollars could be saved in Australia annually, and is something that politicians and he ACC should be focused on.