IAG Highlights Climate Change's Impact on Home Insurance Costs

According to IAG's Chief Financial Officer, William McDonnell, the insurer has observed a gradual increase in the component of premiums related to natural perils. This uptick is particularly noticeable in areas more susceptible to extreme weather events. McDonnell underscores the necessity for urgent action to enhance the resilience of buildings and infrastructure, aiming to mitigate long-term risks and associated costs.

A recent report by IAG, in collaboration with the US National Science Foundation's National Centre for Atmospheric Research, sheds light on the escalating risks posed by severe convective storms, including hailstorms, especially in Australia's densely populated southern regions. The report indicates that rising temperatures are leading to more days with extreme weather conditions conducive to uncontrollable bushfires. Additionally, shifting rainfall patterns are reducing soil and fuel moisture in some areas, creating continuous, fire-supportive landscapes.

The report also forecasts that tropical cyclones may become windier and wetter, potentially maintaining their intensity further away from the tropics. This development could escalate risks in regions like south-east Queensland, New South Wales, and south-west Western Australia, where buildings may not be constructed to withstand mid-to-high-end category cyclones.

Over the past five years, Australia has experienced 14 declared catastrophes and eight significant weather events, resulting in insured costs totaling $22.5 billion. This figure represents a 67% increase compared to the previous five-year period, highlighting the growing financial toll of extreme weather events on the insurance industry and homeowners alike.

In response to these challenges, IAG advocates for the establishment of consistent state and federal guidelines on natural hazard risk tolerance. The insurer also supports the creation of a national property-level hazard database to inform development decisions and building codes that reflect changing hazard profiles, ensuring long-term durability. Planning major infrastructure with a 100-year horizon to accommodate climate projections is also recommended.

For beauticians and small business owners in the beauty industry, these developments underscore the importance of securing comprehensive insurance coverage that accounts for the increasing risks associated with climate change. Understanding the factors influencing premium costs and taking proactive measures to enhance the resilience of business premises can help mitigate potential financial impacts.