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Study wants ‘Medicare-style’ insurance pricing

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A University of NSW report wants a “Medicare-style” system introduced to address the premium affordability problem in bushfire-prone areas.

The report, Social Justice and the Future of Fire Insurance in Australia, says the publicly funded universal health insurance scheme’s focus on equality offers the best approach to blunting the impact of rising premiums caused by climate change-induced bushfires.

It says bushfires will become more frequent and severe because of climate change, and the current market-based model of setting home premiums for at-risk properties is increasingly untenable. One in 20 Australian homes could be uninsurable by the end of the century if the status quo remained, it says.

“Bushfire insurance should be more like Medicare than current home insurance,” the report says. “Australia can no longer operate its bushfire insurance regime according to a purely market-based distribution of risk model.

“The best approach for the Australian bushfire insurance regime is a model based on fairness as social justice.”

Professor Jeremy Moss, the report’s lead author, says the report was prepared to start a public dialogue on how the country should protect citizens’ welfare as more climate change-fuelled severe weather events are expected.

“Australia is going to be prone to more and more mega-bushfires and there is a lot of evidence to suggest now that this will impact more and more houses and more and more homeowners,” he told today.

“And this to me, raises important questions about how we as a society deal with the risks to those homeowners, because currently we deal with them by allowing the market to decide who gets insurance and who doesn’t.

“I’m asking the question whether or not the current model of insuring at-risk homes is fit for purpose.”

The Insurance Council of Australia says other solutions would be more fair and more effective in ensuring the long-term sustainability of communities in high-risk areas and reducing premium pressures.

“The ultimate goal should be to protect at-risk communities through physical mitigation infrastructure and improved policy settings relating to building codes, risk-appropriate land-use planning, and the removal of state taxes and levies that have a significant impact on insurance affordability,” spokesman Campbell Fuller told today.

Professor Moss says the report has been submitted to the bushfires royal commission, which begins its hearings on Monday. Click here for the report.