Although bushfires have not traditionally been a reason for concern vis-à-vis home insurance, the devastating fires currently raging in Australia may change that. Insurance, after all, is a numbers game. Even though Australia has always been prone to fires, the likelihood of future fires may become a risk factor not unlike flooding. According to climate risk analyst Karl Mallon of Climate Risk, 720,000 homes will be uninsurable by 2100. Coverage will either be unavailable or inordinately expensive.
12.35 million acres have been burned by bushfires so far, almost three times the land destroyed by the 2018 California fires and Brazil’s 2019 Amazon fire combined. It is unclear whether the amount of damage caused by the current bushfires in Australia will be considered an unacceptable probability by insurers. The Insurance Council of Australia estimates the damage is as high as $700 million. 8,985 fire-related insurance claims have been made since the fires began in September of 2019.
Fire insurance dates to the Great Fire of London in 1666. You might think that in Australia, where conditions for large-scale fires are known and predictable, everyone would have fire insurance. That is not the case. Many living south of Mago on the South Coast counted on hazard-reduction burning over insurance to protect their homes. Many were low-income earners. Even if they had insurance, they couldn’t afford the premiums to adequately cover their homes. At least some insurance companies knew people didn’t have coverage to allow them to rebuild. The Insurance Council of Australia has stated that about 80% of policyholders are under-insured. In addition, a home does not need to be in direct contact with fires to burn. Most residential properties catch fire due to embers flying kilometers from the actual fire.
Financial services like My Money House with specialized branches may be in a unique position to address the challenges of fire insurance going forward for property owners, whether as an investment or for first-time home buyers. The questions for insurers outnumber the answers, at least for now. According to Karl Mallon, those 720,000 homes that will be uninsurable by 2100 are in 445,000 addresses where in 30 years insurance may be unaffordable or completely unavailable. Three-quarters of those 720,000 homes are in the most populated urban areas, where many of the My Money House Group of companies operate.
Future focus may have been best expressed by Country Fire Authority (CFA) captain Ian Brownrigg following the destruction by bushfire of the Clifton Creek Primary School in East Gippsland. Brownrigg disagrees with Victorian Premier Daniel Andrews’ pledge to rebuild the school. “What are we going to do to protect it in the future? That is really the issue,” he said.
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