The risk of extreme weather is higher in northern Australia, making it difficult for insurers to offer affordable insurance coverage. So who should pay for it? The Australia Institute chief economist Richard Denniss wants to find out.
The Australian Competition and Consumer Commission (ACCC)'s Northern Australia Insurance Inquiry is calling for affordable insurance after finding that home, contents, and strata insurance premiums are more expensive in northern Australia than the rest of the country.
ACCC Deputy Chair Delia Rickard explained that premiums in northern Australia are more expensive than those in other regions because extreme weather risk is higher. As climate change impacts Australia's weather for the worse, Denniss wants to find out if homeowners, taxpayers, or companies should pick up the tab for climate change costs.
If homeowners would pay, Denniss told The Guardian: “Let insurers do their job and assess the risk of each property. If insurance for some properties is ‘too expensive’, then the price of those properties will fall as new buyers factor in expensive insurance to what seems like a ‘cheap house’.”
If the general public would pay, the costs will be small, but there will be no price signal to discourage people from building more expensive houses in cyclone-prone regions, says Denniss.
“There's also the question of whether non-homeowners in southern cities should fund the lifestyle choices of homeowners in north Queensland,” he continued.
However, if homeowners and the taxpayers would not pay, Denniss suggested putting a levy on companies that profit from causing climate change.
“Such a levy could help not just homeowners but [also] local councils and other groups that will inevitably bear the costs that come with other people's decisions to buy and sell coal,” he said.
