Insurance - And Storm Damage !

In December, Sydney was hit with a very severe summer storm that caused trees to collapse onto houses, flooding that closed roads and in some areas hail as big as cricket balls.  The insurance industry is still receiving claims and the final damage bill will run to hundreds of millions of dollars.

Similar summer storms are a regular event here in the sub-tropics but global warming has the capacity to make them more severe - and more often, and there are changing factors that increase the damage bill.  The number of homes with a solar collector on the roof increases steadily and hail damage will bring an increase in replacement costs.

There has been a marked improvement in the Australian car fleet since the last severe hail event.  We are driving newer cars and it seems this newer technology is more prone to flooding.  By rule of thumb, a car that is even partially submerged in a rain event is a write off. Similarly, hail damage is near impossible to restore to new condition.

It is surprising the number of homes and cars in Australia  that are not covered by comprehensive insurance. To many owners, that is an acceptable risk factor.   This summer storm concentrated the damage into half a dozen suburbs with most of Sydney very lightly affected.  The average householder can recount years of experience in which their property has survived weather events damage free.

That is - of course - the very reason that insurance exists.   The greater number of people who are damage free pay a premium to cover the few who have the misfortune to need costly repairs or replacement.  Unfortunately, as the price of insurance rises a greater proportion cease to pay for cover.  In some cases this is sheer necessity.   They lack the money and have no other option than to take the risk on their own shoulders.

The cost of the fire brigade and other fire services is unfairly levied as a tax on each insurance premium.  Emergency services respond to every call out without discrimination and therefore the uninsured get their protection without any form of compensation for services rendered.  It would be much fairer if all homes were given a basic insurance cover and the premium added to the council rates bill.

Such cover would protect dwellings from fire, flood and storm damage but residents would need to make their own arrangements over burglary and contents damage.  Rental homes would receive this same basic cover and owners could add further insurance to cover tenant out of pocket expenses if they so desired.

The big gain would be a reduced premium if insurance covered all homes in a statistical area.  It also ensures that fire and emergency services are fully funded to provide the cover needed.  That December damage bill will ensure that premiums will continue to rise with inflation and homes covered will drop further.   The cost will become prohibitive unless a fairer distribution of costs replaces taxing insurance premium renewals.