Commentary: Australian bushfires reveal a national crisis of under-insurance

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One lesson from Australia's past bushfire disasters is that too many homes are under-insured. But it's a lesson we've failed to learn, say three ...

For example, a woman who lost her home in Kinglake, northeast of Melbourne, in the 2009 fires, told us how her insurance calculations turned out to bear no resemblance to the actual cost of rebuilding.

For one thing there’s the need to comply with new building codes, which have been improved to ensure buildings take into account their potential exposure to bushfire. This is likely to increase costs by 20 per cent or more, but is rarely made clear to insurance customers.Construction costs also often spike following disasters, due to extra demand for building services and materials.

“People who owned houses, any money that was owing, everything was taken back to the bank before they could do anything else,” said a former shop owner from Whittlesea .People came into the shop and cried on my shoulder, and I cried with them. I helped them all I could there. That’s probably why we lost the business, because how can you ask people to pay when they’ve got nothing?In rural areas there is often a shortage of rental properties.

This is because a sense of community is vital to individuals’ willingness and ability to prepare for and act in a threat situation. A confidence that others will weigh in to help in turn increases people’s confidence and ability to prepare and act. But the evidence suggests this is an increasingly fraught strategy, particularly when rural communities also have to cope with the reality of more intense and frequent extreme weather events.

 

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