Wild Weather Claims Surpass 2024 for NRMA Insurance, Highlighting Climate Change Risks

Strategic Insights -

Australian insurance companies are facing a significant increase in claims related to wild weather events, with NRMA Insurance reporting 32,000 claims in the first five months of 2023, surpassing 2024's totals. Climate Change Authority chair Matt Kean emphasizes the need for practical action to reduce emissions and protect against climate-related risks. The Albanese government has invested $27.4 million in a National Climate Risk Assessment and National Adaptation Plan, but the report has yet to be released.

Key Takeaways:

  • NRMA Insurance has received 32,000 claims for wild-weather-related damage to vehicles and property between January and May 2023, including cyclones, floods, damaging winds, and storms.
  • The claims exceed 2024's totals, highlighting the increasing risk of climate-related disasters in Australia.
  • Climate Change Authority chair Matt Kean stresses the need for practical action to reduce emissions and protect against climate-related risks.
  • The Albanese government has invested $27.4 million in a National Climate Risk Assessment and National Adaptation Plan, but the report has yet to be released.
  • The Insurance Council of Australia estimates that about 1.4 million properties nationwide are at risk of flooding, with 225,000 homes and 73,000 businesses facing at least a 2 or 5 per cent chance of flooding each year.
  • Approximately 171,000 properties in NSW are at severe or extreme risk of flooding, the highest of any state.
  • Insurance Council chief executive Andrew Hall notes that the increased risk of flood due to climate change, combined with the industry's improved ability to assess threat, means that insurance is becoming a restoration product for those at high risk.
  • Hall emphasizes that this is not evidence of market failure, but rather the result of the industry accurately pricing its product, with the cost of insurance becoming so high that it is equivalent to setting aside $30,000 to $50,000 per year to replace the interior of a home.

Statistics:

  • 32,000: the number of claims received by NRMA Insurance between January and May 2023 for wild-weather-related damage.
  • 53,716: the number of claims received in the first five months of 2022 for damage from widespread floods and an east coast low.
  • $27.4 million: the investment made by the Albanese government in the National Climate Risk Assessment and National Adaptation Plan.
  • 1.4 million: the estimated number of properties nationwide that are at risk of flooding.
  • 225,000: the number of homes facing at least a 2 or 5 per cent chance of flooding each year.
  • 73,000: the number of businesses facing at least a 2 or 5 per cent chance of flooding each year.
  • 171,000: the number of properties in NSW at severe or extreme risk of flooding.
  • 40 per cent: the estimated percentage of properties in Australia that are at high risk of flooding in 10 years.
  • $30,000 to $50,000: the estimated annual cost of replacing the interior of a home in areas with high flood risk.

Sources:

  • NRMA Insurance
  • Climate Change Authority
  • Australian Government (Albanese government)
  • Insurance Council of Australia
  • CSIRO (Commonwealth Scientific and Industrial Research Organisation)
  • Peter Chan, NRMA Insurance's natural perils team manager
  • Andrew Hall, Insurance Council chief executive
  • Matt Kean, Climate Change Authority chair