How Is Australian Weather Changing The Insurance World?
How will changing weather patterns affect SMEs?
If you compare the weather patterns now and twenty years ago you will notice significant changes across Australia. Notably the days are becoming hotter, drier and the sea levels are slowly rising. So given these changing weather patterns, how can insurance providers and SMEs work together to ensure that the providers correctly assess these changing risks and businesses are suitably insured against these changing weather patterns?
The Australian Actuaries Climate Index measures our extreme weather conditions and indicates how these are changing over time. The most recently updated index shows that compared with twenty years ago, weather conditions are trending upwards with more hot days than normal, more signs of drought and an increase in sea levels across Australia. Whilst this is not news to most, it does mean that SMEs and insurance providers now need to deal with conditions that weren’t an issue twenty years ago.
Whilst we are all aware that there is a big element of unpredictability in Australia’s weather patterns, how concerned should SMEs be with these changes?
Should SMEs be concerned with changing weather patterns?
When a disaster strikes, it usually happens to someone else, somewhere else in the world. Changes to the weather patterns however, can affect all of us in Australia in one form or another. For example, rising sea levels may mean that businesses will eventually need to relocate to areas further inland, potentially disrupting their trade during this transition.
It’s fair to say that the insurance industry tries to make the best possible risk assessments, given all the available information. Changes to the weather patterns however can be difficult to interpret, increasing the complexity of assessing risk.
Whilst many governments and scientists are studying these weather changes and trying to find workable solutions, insurance companies still have to account for this unpredictable weather in their risk assessments.
An added complexity is that changes in Australia’s weather patterns are not consistent across the country. For example, the increase in hot weather in Tasmania’s Southern Slopes is five times smaller than in the Central Slopes of the Eastern States. Likewise, sea level rises in the Southern and South Western Flatlands, along WA’s southern coastline, are five times smaller than along the North East Coast of Queensland.
These regional differences will affect the risks faced by insurance providers and the risks held by SMEs in these regions, however, in time these changes will occur right across Australia. So, in light of the changing weather patterns in Australia, how can SMEs work with insurers to reduce their risk?
Is it possible for SMEs to reduce their risks from changing weather patterns?
The insurance industry likes to identify and plan for all risks, yet it’s difficult to plan for change in weather patterns. Despite these problems, insurance providers and SMEs can work together to reduce these risks. One course of action is for SMEs to reduce their carbon footprint, by becoming more environmentally aware. For best practice, consult with your insurance provider and ensure that your SME is covered for any potential damages this changing Australian weather may cause.
If you haven’t already, contact me today and start that conversation to ensure your business is prepared for any risk this changing Australian weather may bring.
General Advice Warning
The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.