Disaster Insurance needs a ‘Medicare style’ approach

1 December 2022  |  

Dec 1

Insurance horrors will escalate without a fairer home insurance model

We must prepare to experience extreme weather events like damaging floods, bushfires and cyclones into the future – according to the latest CSIRO State of the Climate report out this week, while hundreds of thousands of people find their homes have become uninsurable or premiums becoming unaffordable.

State governments are taking steps to provide relief – like the Queensland government’s establishment (with the Federal government) of the Northern Australia Reinsurance Pool and the NSW government’s $800 million buyback scheme for areas of the Northern Rivers that were hardest hit by floods.

But what’s really needed is a total rethink of how we do home insurance, and for the Federal Government to step up nationally, as they did with medical insurance.

Because insurance companies run on a purely market model, they make decisions to keep their businesses profitable. We are now seeing insurers pull out of whole postcodes they deem flood risks, including latest reports that insurers have told property owners in the Central West of NSW that their flood insurance won’t be renewed next year, and the Insurance Council of Australia warns many of the towns impacted by floods in the past few months have become uninsurable.

A report by the Actuaries Institute estimates that up to 1 million households may now struggle to afford home insurance premiums, with some households being told their policies could be $25,000 per year.

It is vital that there is some mechanism for people in these disaster zones to affordably insure these homes. It is unfair to transfer the risk of floods and bushfires onto households, especially vulnerable ones.

Calculations by Climate Risk, find that more than 445,000 Australian homes are predicted to be uninsurable for fire within 30 years, with this number rising to 718,000 by 2100.

But it’s riverine flooding that poses the greatest insurance risk – making up 80% of properties considered uninsurable by 2030. According to a recent Climate Council report, across Australia, 2.5% of properties (360,691 properties) will be at ‘high risk’ of riverine flooding by 2030, with a further 372,684 at ‘medium risk’ of riverine flooding.

These alarming statistics should remind us that climate change is not simply about being harmed by fires, floods or cyclones. The harms that we are now seeing are caused in part by governments responding (or not responding at all) in the right way. If we are to have a fair climate transition we need to get our response right.

Instead of expecting all home-owners to bear the risk of loss in the current market-based model, we should adopt a model based on “fairness as social justice”. Insurance for the provision of goods that are basic requirements of life – such as housing or health – should be guaranteed – at least up to a minimum value.

Australia’s current medical care system is operated according to this model, with Medicare providing medical treatment to individuals at low or no cost, regardless of their risks and choices.

Moreover, the risk of bushfires and floods has been (at least partially) caused by decades of government inaction on climate change. Australia is one of the highest per-capita emitters of greenhouse gases (GHGs), and one of the world’s largest exporters of coal and liquid natural gas (LNG).

Currently, around 97% of all Federal funds spent on disasters are spent after a disaster occurs. This is despite the fact that a dollar spent on mitigation tends to reap a saving of around five dollars in post-disaster damages. Indeed, the Productivity Commission has noted that the Federal Government’s inherited approach to disaster relief is rife with ad-hoc responses and short-term political opportunism.

The Insurance Council of Australia (ICA) stresses that investment by government in mitigation does reduce insurance premiums. CEO Andrew Hall noted in a recent speech that in the flood-prone town of Roma in Queensland, constructing a $15 million flood levee to protect 483 homes and 75 businesses resulted in an average of 34% reduction in insurance premiums.

Creating a fairer insurance model will need to be supported by reviewing building policies such as: implementing higher building standards (and subsidies) that lower the risk of a home being destroyed; providing incentives to encourage people not to build in some disaster-prone regions; and maybe, limiting or capping coverage to occupied dwellings (that are inhabited for more than 183 days in a calendar year).

This will be particularly important for investment properties, that are the primary dwelling of the tenants—and thus may require coverage by the landlord in order to ensure that tenants are not deprived of their basic goods.

Australia’s current model of home insurance is not fit for purpose as we continue to face escalating climate disasters. Under the current model many Australian homes are becoming uninsurable, leaving the owners of those properties vulnerable to destitution. It’s time to pressure our government to step in and develop a public home insurance model.


Jeremy Moss is Professor of Political Philosophy at the University of NSW and the author of

The report Social Justice and the Future of Fire Insurance in Australia and the book Carbon Justice.


Originally published in the Canberra Times, 1/12/22