The Australian insurance industry is grappling with the dual impacts of climate change, which presents both significant risks and opportunities, according to the 2023 Actuary of the Year, Sharanjit Paddam.
Paddam, a principal at Finity and the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Insurance Leader of the Year in 2022, noted that climate change is driving up home insurance costs. However, the shift towards decarbonisation also introduces new assets that need insurance coverage.
Paddam is set to speak at the Australian Insurance Law Association’s (AILA) 2024 conference, Sunny Side Up, scheduled for September 11 to 13 on the Gold Coast.
He will present insights from the third annual home insurance affordability report for 2024, which Finity is preparing for the Actuaries Institute.
The 2023 report found that one in eight households were paying more than a month’s worth of income on premiums, up from one in 10 the previous year. This increase means that approximately 1.24 million households now struggle with insurance affordability, marking a significant rise of nearly 250,000 in just a year.
Preliminary findings from the 2024 report will be discussed at the AILA conference.
Paddam stressed the urgent need for substantial action on climate change to curb rising insurance premiums, especially for those in high-risk areas like flood zones, bushfire-prone regions, and northern Australia, which is vulnerable to cyclones.
“Unless we take serious action on climate change, it will continue to drive up insurance premium costs, particularly for those living in disaster-prone regions, such as flood zones, close to bushfires, or in northern Australia where they’re exposed to cyclones,” he said.
On the positive side, he highlighted that the move towards electrification of homes and vehicles creates new insurable assets. Additionally, the expansion of renewable energy sectors requires tailored insurance solutions.
“There’s rapid deployment of renewables in Australia and those new businesses need insurance,” he said.
The AILA conference will cover new sustainability reporting standards in Australia, which will require organisations, including insurers, to disclose climate-related financial information starting in June 2026.
Finity Consulting is aiding insurers by analysing the impact of climate change on their financial statements and helping them meet these disclosure requirements.
The conference will host a range of speakers addressing key issues that will shape the future of the insurance industry. It will be held at the Gold Coast Convention and Exhibition Centre in Broadbeach, Queensland, and registrations are currently open.
AILA national president Melanie Quixley said the conference theme, Sunny Side Up, aims to explore how the insurance industry can positively impact the community, climate, and future living conditions.
The association has also opened applications for its annual Ron Shorter Award, a public speaking competition.
