We’ve lost climate change fight: Now NZ needs insurance overhaul to protect our homes - Shane Te Pou

THREE KEY FACTS

• The cost to insurers of last year’s Auckland Anniversary floods and Cyclone Gabrielle is estimated at more than $3.5 billion.
• More than 112,000 claims were lodged after the two natural disasters.
• Premiums for house, content and car insurance have soared over the past year - the cost of insuring a house increased six times faster than incomes for the year to March.

OPINION

It’s hard to believe that it’s been less than two years since the Auckland Anniversary Weekend floods and Cyclone Gabrielle ripped through our communities.

Our whare like so many others, was flooded, although we were luckier than others who lost everything.

The floods and the cyclone each cost $2 billion in insured losses and billions more in lost economic output, making 2023’s disasters the costliest weather events in Aotearoa’s history.

But 2023 wasn’t a one-off. According to the Insurance Council, we also broke the record for extreme weather insurance claims in 2022, 2021, and 2020. Storms are happening more frequently, with greater ferocity, and there’s more assets for them to damage.

It’s no great mystery why – a warmer atmosphere holds more energy and more water, that means more violent storms. It’s climate change.

And, unless we do something to prevent runaway climate change, this is how it will wear us down.

Not with a single titanic event, and not with a gradual rise in temperature, but with an increasing tempo of more and more destructive weather events, so we have to expend more of our resources just recovering from the last disaster before the next one, rather than building wealth for the future.

We have left it too late to avoid serious impacts from climate change. They’re already here, and they’re going to get worse.

This Titirangi home was red-stickered after the Auckland Anniversary Weekend floods last year. Photo / Dean Purcell

According to the Parliamentary Commissioner for the Environment, what is today considered a “one in a hundred-year flood” in our major coastal cities will become a one in every one-to-four-year event by the mid-century due to sea level rise.

It’s estimated that 250,000 Kiwi homes are already at risk of flooding, not to mention countless businesses, infrastructure assets, and public buildings. As the risk of flooding rises, so will premiums - to the point where thousands of homes will become effectively uninsurable.

The insurance system is already showing signs of pressure from increased disaster payouts, with home premiums doubling on average in the last decade, three times the rate of inflation.

We’re going to need an insurance system that can handle the calls made upon it and use payouts to direct resources to repairing damage and improving resilience.

The Helen Clark Foundation has looked at this issue in depth in its new report ‘Premiums Under Pressure: How climate change is reshaping residential property insurance and what to do about it’.

The report finds that it is vital that most properties remain insured to give communities access to the funding to bounce back after disaster.

We only need to look to the ‘Quake Outcasts’ in Christchurch, a group of 45 uninsured property owners who had to fight for years for red-zone payouts. Or remember that the first Labour Government established the Earthquake Commission (now, called the Natural Hazards Commission) because low levels of insurance meant many Wellington and Wairarapa buildings were still unrepaired years after the 1942 Wairarapa earthquakes.

But more weather disasters with greater damage means higher payouts, and that means higher premiums. How to keep insurance affordable?

The foundation recommends sharing the burden, which is what insurance is all about, after all. It suggests that insurance premiums should be subsidised for low-income families, so they are not left exposed, and broadening the Natural Hazards Commission’s remit to cover floods just as it covers earthquakes, volcanos, and tsunamis.

That not only means more homes are covered, but also reduces costs because the commission doesn’t charge a profit and is ultimately backed by the Government.

But, at the same time, we’ve got to move to reduce risk. The report says we need to give councils greater powers to decline land-use consents in areas vulnerable to flooding and other climate change impacts.

If taxpayers are going to be backing affordable flood insurance, we have a right to expect new homes won’t be put up on flood plains.

The good news is that on this last point at least, the Government and Parliament is already acting.

The last Government created a National Adaptation Plan with a big focus on giving councils the power to block building in vulnerable locations.

Parliament’s finance and expenditure select committee has recently undertaken an inquiry into the thorny questions of climate adaptation, such as who pays for properties lost to managed retreat from rising seas? Climate Minister Simon Watts is promising legislation next year.

Over the coming decades, we will face the costs of our species’ failure to act fast enough to prevent climate change, despite all the evidence we had.

It is vital that we share those costs among ourselves fairly and make sure insurance is there as a safety net for communities when they suffer disaster.