Role of insurance in adaptation

Many properties in coastal Australia are underinsured or lack insurance cover for inundation and erosion, and this situation is likely to get worse due to climate change and sea level rise.

Many insurance companies operating in Australia do not cover storm surge, erosion or gradual sea level rise in their residential property insurance.

There are a considerable number of buildings at risk from sea-level rise in Australia. It is estimated that up to $63 billion (2008 replacement value) of existing residential buildings are potentially at risk of inundation from a 1.1 m sea-level rise in Australia, which could potentially effect between 157 000 and 247 600 individual buildings.

Governments are often the ‘insurer of last resort’ following a disaster and, in the absence of adaptation measures, this role may grow under sea-level rise. For example, following the Queensland floods of 2011, householders could apply for a number of grants from government, including hardship grants and grants to cover restoration of utilities (The Sydney Morning Herald 2011).

The Productivity Commission, in its report ‘Barriers to Effective Climate Adaptation’ was clear that governments should not subsidise property insurance in at-risk areas, as this would lessen incentives for property owners to take actions to reduce their risk while imposing costs on taxpayers.

Local councils have a role in the areas of hazard mapping and data provision, community awareness-raising and education, mitigation activities (i.e. building preparedness), and support for emergency services and volunteers. By undertaking or augmenting these roles, councils can build the resilience of communities to address future climate change and sea-level rise.

More on the role of insurance in adaptation here

More information on insurance and climate change here

Coastal erosion