Key Takeaways:
- AA Insurance has temporarily stopped offering new home insurance policies in Westport due to the town’s high flood risk.
- The decision is seen as a sign of things to come, with climate change policy experts warning that more insurers will withdraw from high-risk areas.
- The move is intended to push for investment in flood defences, but experts warn that this could increase the danger in Westport rather than reducing it.
- There are calls for greater transparency from insurers about areas they are withdrawing from, to help communities understand the risks they face.
- The government’s national adaptation framework aims to address the issue, but questions remain over funding and who will pay for resilience measures.
Introduction to the Issue
A major insurance company, AA Insurance, has made the decision to temporarily stop offering new home insurance policies in the town of Westport due to its high flood risk. This move has significant implications for the town and its residents, and is seen as a sign of things to come as the effects of climate change become more pronounced. The decision affects properties in the 7825 postcode, which covers Westport, Carters Beach, and Cape Foulwind. Existing policies will remain in place, and the company has put a transfer policy in place for anyone looking to buy or sell a house that is currently insured with AA Insurance.
The Impact on Westport
The town of Westport has a long history of flooding, with a major flood in 2021 leaving over 100 homes uninhabitable. The town is located in a high-risk area, with the Buller River posing a significant threat to properties. The local council has been working on a plan to gradually relocate the town to higher ground, away from the river, but this is a long-term project. In the meantime, the council is working on building 17 kilometers of stopbanks to protect properties from flooding. However, experts warn that even with these measures in place, the town will still be at risk from major flooding events.
The Role of Insurers
AA Insurance’s decision to withdraw from the Westport market is seen as a sign of the increasing risk that insurers are facing due to climate change. The company’s head of underwriting, Dee Naidu, stated that the decision reflects the elevated natural hazard risk of flooding in the area, and that the company’s exposure has reached a level where a pause on new policies is the most responsible step to ensure that the company can be there for its existing customers when they need it most. Climate change policy expert Belinda Storey notes that this decision is not unprecedented, and that Australian insurance giant Suncorp, which owns AA Insurance, has made similar decisions in Australian towns. Storey suggests that the move is intended to push for investment in flood defences, but warns that this could increase the danger in Westport rather than reducing it.
The Need for Transparency
There are calls for greater transparency from insurers about areas they are withdrawing from, to help communities understand the risks they face. Climate policy expert Jonathan Boston notes that this information is crucial for communities to make informed decisions about their future. Boston also warns that the issue of insurance withdrawal is not limited to Westport, and that many more communities will face similar challenges in the future. He suggests that the government’s national adaptation framework, which aims to address the issue, is a step in the right direction, but that more needs to be done to provide clarity on funding and who will pay for resilience measures.
The Government’s Response
The government’s national adaptation framework, announced last year, sets out four areas of work, including developing new national hazard datasets and a requirement for councils to develop adaptation plans for priority areas. Climate Change Minister Simon Watts notes that the framework will be passed into law before the election in November, through an amendment to the Climate Change Response Act. However, questions remain over funding, with only $200 million of the $1.2 billion regional infrastructure fund ring-fenced for flood protection. Watts notes that adaptation involves a significant fiscal cost that will need to be shared across society over time, but does not provide clear guidance on how this will be achieved.
Conclusion
The decision by AA Insurance to withdraw from the Westport market is a sign of the increasing risks posed by climate change. While the company’s decision is intended to push for investment in flood defences, experts warn that this could increase the danger in Westport rather than reducing it. There are calls for greater transparency from insurers about areas they are withdrawing from, to help communities understand the risks they face. The government’s national adaptation framework aims to address the issue, but questions remain over funding and who will pay for resilience measures. As the effects of climate change become more pronounced, it is likely that more communities will face similar challenges, and it is essential that we have a clear and comprehensive plan in place to address these risks.
