Uninsured !

This week Sydney had a summer storm that damaged a lot of houses.  It was very predictable - and in fact the weather bureau gave plenty of warning because whenever we get a day of very high humidity and a temperature near forty degrees the mix of hot air from inland Australia and the colder air off the ocean usually combine to produce a violent thunder storm with intense cyclonic wind cells.

What is astonishing is the number of Sydney homes that are not covered by any form of insurance. We see lurid pictures on the nightly television news of great trees that have crashed through the roof of splendid homes and virtually demolished them.  Repairs will run to hundreds of thousands of dollars and in many cases require demolition - and the fact that the owner has not  bought insurance protection seems unthinkable.

In some cases this can be blamed on the housing price bubble. The income of many families is so heavily mortgaged just keeping a roof over their heads that house insurance is out of the question, unless the mortgagee requires it as part of the mortgage deal.  Other owners with a gambling instinct take a chance that the odds are in their favour - and for years they get away with it.   It seems to be just the unlucky owner that gets hit with fire or storm damage while whole streets survive intact - year after year.

The insurance industry has some peculiar thinking applied to home insurance.   They insist that if you insure, it musty be for the full value, and if you are under insured that ratio will apply to the payout in the event of a claim - and consequently the premium may be a struggle beyond the capacity of some owners.   That is not an attitude that applies to other forms of insurance.  You are perfectly free to insure your life for whatever sum you feel necessary.   Surely a home owner should be able to buy the amount of insurance he or she can afford - and carry the risk on the uninsured portion as their liability ?

There is another factor that has a great impact on the premium cost of home insurance !   The government has chosen to fund the cost of fire services in this state as a levy on each insurance premium and hence the cost of the fire brigade is added as a significant total of what each insured householder pays.   The uninsured escape this burden, but when there is a house fire the fire brigade attends and fights the fire and when storm damage requires assistance the emergency services arrive with chain saws and helps clean up the mess.  The uninsured receive exactly the same services as the insured, but the insured people pickup the entire tab.

There have been mutterings - but so far no action - to relieve the insured of that anomaly  by removing the fire levy from household insurance and adding it to the council rates that apply to all property.   The fire brigades serve all needs equally - and it would be a much fairer deal if the cost was shared equally.   Importantly, the cost of home insurance would fall precipitately and many more people would cover their home asset with insurance.

This housing price bubble is actually working against insurance in the thinking of some people.  In many suburbs the value of the land is the factor that would be achieved in a sale and there is an expectation that the existing dwelling would be demolished to make way for a new home, hence if it were destroyed in a fire or storm - it would be revenue neutral.

This weeks storm threw the spotlight on the deficiencies of the home insurance industry.  There will be more storms before this summer ends and this is a problem that should be high on the agenda to be cleared up and made sustainable with a fairer distribution of costs for fire services.   It awaits the attention of parliament !