Hurricanes Harvey and Irma have dominated the news cycle over the past few weeks, with the US suffering some of the most devastating natural disasters in recent memory.
Sadly, Australia is also no stranger to extreme weather events. The states and territories face various risks, including floods, droughts, bushfires, cyclones and earthquakes.
But what is the true cost of natural disasters to the country? Let’s take a look at some of the latest research to see why comprehensive business insurance is so crucial in Australia.
The rising cost of disasters
The Australian Red Cross’s World Disaster Report for both 2015 and 2016 showed Asia-Pacific as the region most affected by global catastrophes.
A 2015 survey from the ICA showed there was a non-insurance rate of 12.8 per cent among SMEs.
In 2015, two out of every five disasters occurred in the region, with Australia’s costs alone totalling $9 billion.
Worldwide economic losses due to extreme weather are now estimated at between $197 billion and $263 billion each year, which means Australians pay as much as 4.5 per cent of the global bill.
However, recent research from the Australian Business Roundtable for Disaster Resilience and Safer Communities indicates that natural disasters cost the country 50 per cent more than these estimates.
The roundtable released two reports last year forecasting that disasters would result in $33 billion worth of social and economic damages a year by 2050.
Natural disasters in 2017
Australia’s most devastating natural disaster of 2017 so far was Cyclone Debbie, with Insurance Council of Australia (ICA) data from June showing losses approaching $1 billion.
The overall economic cost of the disaster, which claimed more than a dozen lives, is likely to be much higher.
Earlier in the year, the ICA reported that losses for February bushfires and storms in NSW surpassed $70 million, with homes and businesses in Sydney’s north-western suburbs taking the hardest hit.
Despite the dangers of natural disasters in Australia, many SMEs in the country remain underinsured or fail to take out any cover at all.
A 2015 survey from the ICA showed there was a non-insurance rate of 12.8 per cent among SMEs, although this was down significantly from 25.6 per cent in 2007.
— Australian Red Cross (@RedCrossAU) October 20, 2015
Many organisations may not realise their current level of insurance coverage is insufficient for their needs. The ICA research revealed that only 1.9 per cent of SMEs that had insurance believed their policies were inadequate.
With natural disasters and other business continuity threats always on the horizon, can organisations afford to risk having gaps in their insurance?
Please contact MGA Insurance Brokers for more information.