July 2020

The Nation Reviewed

Weathering the cost

By Bronwyn Adcock
After 300 inquiries into natural disasters and emergency management, insurers are taking the lead

According to a database kept by the Bushfire and Natural Hazards CRC, since 1886 Australian governments have held more than 300 inquiries and reviews into natural disasters and emergency management. The decade leading up to 2017 was particularly jam-packed, with 90 such inquiries, delivering more than 2000 recommendations.

In the wake of this past catastrophic fire season, where around 3100 people lost their homes, 33 their lives, and an area the size of Syria burned, Australians may well be questioning just how much we’ve learnt from this abundance of examination.

The Royal Commission into National Natural Disaster Arrangements, the latest inquiry, was called by Prime Minister Scott Morrison in February. It was a response to the fires, yet given a much broader remit, to examine how we can better prepare for and respond to all kinds of natural disasters. Public hearings began in late May, with witnesses appearing via oddly framed video streams from home offices and spare rooms, the country still in lockdown.

On day one, in the afternoon session, representatives appeared from Australia’s biggest insurer, IAG Limited, and the professional body for actuaries, the Actuaries Institute. Both gave submissions that identified a fundamental flaw in our response to natural disasters; Australia still spends a disproportionate amount of money mopping up after a disaster, and not enough on risk mitigation and adaptation – we keep trying to shut the gate after the horse has bolted. 

“Government funding should further prioritise risk reduction which will reduce the need to spend on disaster recovery,” said the IAG submission. 

Another major insurer, Suncorp, which gave a submission but was not asked to appear, was even more direct: “When it comes to natural disasters, Australia is currently stuck in a cycle of disaster, rebuild, recover, repeat.” 

This is not a new point; it’s been made in numerous other reports and inquiries, most notably by the Productivity Commission, in an inquiry called in 2014 by then treasurer Joe Hockey. Its report, “Natural Disaster Funding Arrangements”, found we “over-invest in post-disaster reconstruction and underinvest in mitigation that would limit the impact of natural disasters in the first place”.

(In 2018, a taskforce working under Peter Dutton’s Home Affairs department developed a National Disaster Risk Reduction Framework – on paper, a proactive approach to disaster management. But to date, no implementation plan has been published.)

For insurers, who must pay out claims when a natural disaster hits, and actuaries, who must ensure insurers remain financially viable, the extreme weather patterns emerging as the climate changes are raising the stakes and increasing the urgency to act. 

Mark Leplastrier, from IAG, told the commissioners the company has partnered with the US-based National Center for Atmospheric Research to better understand severe weather in a changing climate. He said this research shows “intense cyclones will become more frequent” in Australia and there will be a “broadening of the areas affected by cyclone”, including a move into north-eastern New South Wales. Bushfire risk will increase in all locations. 

It has released this research, he said, because “there’s an enormous amount of activity right now in disclosing climate-related financial risk for the finance industry” and it wants its work “to act as a base for others to build on, and hopefully we can collectively move forward, establishing more centralised and accurate sources of information”.

Likewise, the Actuaries Institute, which says climate change “poses a serious risk to industries and financial institutions”, told the commission it has set up the Australian Actuaries Climate Index, a tool that tracks trends in extreme weather and is available to actuaries, companies and the general public. 

But there is a flipside to this kind of data-gathering. Insurers are increasingly using it for risk-based pricing – increasing insurance premiums for specific locations, based on their exposure to extreme weather events. It means people living in some areas are finding their premiums becoming more expensive, and potentially unaffordable. 

Insurance affordability was barely touched on by the commissioners (there is another inquiry by the Australian Competition and Consumer Commission under way into this issue), but in the written submissions it was identified as a major issue for government to address. The Actuaries Institute said that “mitigation and adaptation measures can reduce insurance premiums”.

Risk management company Risk Frontiers gave evidence about the cost of this bushfire season. In terms of building damage, it is expected to be comparable to the most damaging fire season – if not the worst – in the past century. However, in a sobering reminder that, as bad as it was, it won’t be the costliest natural disaster we see, Risk Frontiers also presented an analysis of the top 20 postcodes in Australia that pose the greatest risk for financial loss of insurable assets. The risk in all 20 areas was from either flood or cyclone – bushfire did not even make the list.

The first day’s hearing had almost ended when Sharanjit Paddam, representing the Actuaries Institute, interjected with a notably non-financial point.

“There’s some things you can’t compensate for,” he said. “Insurance is almost the piece at the end that tries to financially compensate people”, but it’s a “suboptimal outcome because people’s lives, even if they’re insured to the full extent of the damage, are very adversely affected by these natural disasters”.

This is not news to the communities that experienced this summer’s bushfires, where high levels of trauma and distress still exist.

In Malua Bay, on the south coast of NSW, retiree Robyn Butcher is back living in her suburban cul-de-sac, where her home is one of only four on the street that survived the fires. Insurance has paid for her destroyed sheds and fences, and she finally has the soot out of the house. But nothing will ever compensate for the damage to her lungs from bushfire smoke, and the terrifying experience of cowering on a beach, watching the fire tear through her town, convinced she was going to die. She tells me that when she heard a news report from the royal commission that said these kind of bushfires could reoccur, she thought, I’d rather die than go through that again.

Bronwyn Adcock

Bronwyn Adcock is a freelance journalist whose work has appeared in The Griffith Review and The Saturday Paper and on the ABC.

Cover of The Monthly, July 2020
View Edition
Buy Print Edition

From the front page

Image of Prime Minister Scott Morrison during Question Time yesterday. Image © Mick Tsikas / AAP Image

A web of lies

We may never know when Morrison knew, but there’s no doubt he has lied

Image of Stephen Graham as Joseph McCarthy in The Virtues

Its own reward: ‘The Virtues’

Topping February’s streaming highlights is a four-part series examining trauma and addiction, propelled by Stephen Graham’s affecting performance

Image of ‘Fragile Monsters’

‘Fragile Monsters’ by Catherine Menon

Memories of the Malayan Emergency resurface when a mathematician returns to her home country, in the British author’s debut novel

In light of recent events

Track your vaccine with Australia Post

In This Issue

Image of Ziggy Ramo

The heat of a moment: Ziggy Ramo’s ‘Black Thoughts’

A debut hip-hop album that calls for a reckoning with Indigenous sovereignty and invites the listener to respond

‘Minor Detail’ by Adania Shibli

‘Minor Detail’ by Adania Shibli (trans. Elisabeth Jaquette)

The Palestinian author’s haunting novel about an atrocity committed by Israeli soldiers in 1949

‘The Rain Heron’ by Robbie Arnott

An unsettling near-future tale of soldiers hunting a mythic bird by ‘the Tasmanian Wordsworth’

Illustration by Jeff Fisher

Witnessing the unthinkable

New climate modelling suggests planetary crisis is coming much sooner than previously thought

More in The Nation Reviewed

Illustration by Jeff Fisher

Koori hearings

The Marram-Ngala Ganbu program is transforming the experience of Indigenous families in court

Illustration by Jeff Fisher

A more enlightened deathmatch

Deathmatch Downunder is making wrestling progressive, accessible and inclusive

Illustration by Jeff Fisher

Pack mentality

The ‘dog philosopher-king’ who teaches the owners rather than training the pets

Image of Australian Defence Force Chief Angus Campbell

Australia’s haunted house

The Brereton Report has wounded Scott Morrison’s efforts to make the Australian War Memorial the nation’s ‘most sacred place’

Read on

Image of Stephen Graham as Joseph McCarthy in The Virtues

Its own reward: ‘The Virtues’

Topping February’s streaming highlights is a four-part series examining trauma and addiction, propelled by Stephen Graham’s affecting performance

Image of Foo Fighters frontman Dave Grohl performing in 2019.

Celebrity misinformation

The Foo Fighters’ AIDS denialism should be on the record

Still from Minari.

Small glories: ‘Minari’

Childhood memories are suffused with an adult’s insight in Lee Isaac Chung’s semi-autobiographical film

Image of Eddie McGuire resigning as president of the Collingwood Football Club.

Tumbled Pie

On Eddie McGuire, racism and ‘doing better’