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Insurers driving action on climate resilience in government absence

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In the future, you might search for housing property online and find climate resilience ratings alongside distances to schools and other factors that influence home buying decisions.

This is what Jen St Jack, a consultant from Jack Jensen, hopes to see now that climate resiliency data is becoming readily available.

St Jack, who is working on a climate resiliency project called ‘What We Build, Where We Build’ for the Mount Barker District Council in South Australia, says climate resiliency data had been sitting unused in reports or not publicly available but we are now moving into a “new era of awareness of what the hazards are and where they are”.

“So, what we really want to see in the future is everyone from residents to developers to governments using the same, best-available data to make the best decisions and mitigate climate risk,” she says.

St Jack says insurers are largely behind this push to better understand how homes can withstand the impacts of climate change.

“They see a vacuum on government action and, being insurers, they are very risk adverse. They’ve been steadily plodding along waiting for councils to take the lead, but now they have jumped in to fill the gap.”

St Jack says insurance affordability is set to become a huge problem for people living in homes in high-risk areas vulnerable to climate change and that are not designed to mitigate the risks.

However, escalating and potentially unsustainable insurance costs are not yet widely understood, nor are the long-term affordable-living benefits of resilient homes.

The Mount Barker District Council in South Australia is looking to fix this knowledge gap through the 12-month ‘What We Build, Where We Build’ project. The project is jointly funded by the Commonwealth and South Australian governments under the South Australian Disaster Resilience Grant Program, and the Insurance Council of Australia (ICA).

The project aims to understand the sensitivity of housing stock to climate change on a regional level rather than just individual homes.

Armed with a detailed understanding of climate resilience in a particular zone, better decisions can be made about what kind of homes are built and what types of retrofits should be implemented.

“Councils have a choice right now, to build in resilience, or to build in vulnerability,” says St Jack. “If we continue to build vulnerable homes, we run the risk that insurance premiums will tip the affordability threshold.

“If our communities can’t afford insurance, they’ll be less resilient when disasters hit. Vulnerable houses also risk becoming stranded assets; if a house cannot be insured, it cannot be mortgaged either.”

The scope of the project covers the Adelaide Hills Council, Alexandrina Council, the District Council of Mount Barker, the City of Victor Harbor and the District Council of Yankalilla.

Better hazards data lead to lower premiums

According to St Jack, this type of work will cut insurance premiums.

Despite the enduring myth that sharing information on hazards will cause home prices to plummet and leave councils exposed to legal problems, St Jack says the opposite is true because premiums tend to increase in the absence of data, with insurers assuming the worst.

It’s not easy to predict what impact hazards and vulnerability data will have on house prices. In the case of flood areas, such as by a river or the ocean, prices might drop in the wake of a flood. But St Jack says prices bounce back over time because people ultimately want to live by the water.

Insurers acting on climate change

Australia is behind the rest of the world when it comes to collecting and collating data about natural hazards and future weather events, and knowledge about mitigating climate risk, says Tom Davies, who is responsible for developing and delivering the Insurance Council of Australia’s Resilience Program.

Working closely with the Bureau of Meteorology to fill this gap will be one component of the ICA’s Climate Change Action strategy, currently being developed.

The organisation has had a climate policy since 2008 but the new program installed earlier in the year by 12 member companies signals a “step change to take a more active stance on climate change”.

This includes initiatives such as the launch of a mobile app, MyHazards, detailing property hazard data for residents.

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