Brought to you by:

Build resilience to lower premiums: another industry message cuts through 

The Insurance Council of Australia and its members will be encouraged that another of its key recommendations to government is being acted upon, as a changing climate threatens the nation’s buildings and home premiums continue to rise.

ICA has for years been calling for the principle of resilience to be embedded in the National Construction Code (NCC) – and last week’s meeting of building ministers has set the wheels in motion.

As a first step, Commonwealth, state and territory ministers agreed to include climate resilience as a specific objective of the Australian Building Codes Board (ABCB) from 2025.

A performance-based code, the NCC sets the minimum level for the safety, health, amenity, accessibility and sustainability of certain buildings. The board, on behalf of the federal and each state and territory government, produces and maintains the code.

“Providing this mandate to the ABCB is the first step to ensuring the 2028 National Construction Code includes requirements that new homes are built to withstand worsening extreme weather events,” ICA said today.

Such standards will mean fewer Australians and communities being displaced by natural disasters, lower rebuilding costs and quicker recovery, ministers believe.

“Stronger houses give Aussie families a better chance at reducing the impact of natural disasters,” Industry and Science Minister Ed Husic said.

“The steps we’ve initiated will ultimately help lower the risk of loss of life and property. That will mean peace of mind for Aussie families, as well as downward pressure on their insurance premiums over time.”

ICA says analysis by the Centre for International Economics found strengthening the National Construction Code to require that new homes are made more resilient to extreme weather could save an estimated $4 billion a year. 

This includes a reduction in average annual building costs of about $2 billion per year for cyclones, $1.5 billion per year for floods and $500 million per year for bushfires. 

Separate analysis by the McKell Institute in 2022 found economy-wide costs from extreme weather events are expected to grow by 5% each year (before inflation) and reach a total of $35 billion annually (in 2022 dollars) by 2050. 

“The Insurance Council has long called for the Building Codes Board to adopt building resilience as a key objective of the National Construction Code, alongside health, amenity and safety,” ICA CEO Andrew Hall said.

“Our homes should be built to last a lifetime, so they need to be able to withstand intensifying cyclones, more severe bushfires and worsening flooding.

“Insurance prices risk and unless we reduce long-term risks through strengthened homes, there will continue to be pressure on premiums.

“The economic benefits are clear, and stronger homes that are future-proofed against disaster will also enable communities to recover faster after an event.”

ICA also welcomes the ministers’ commitment to improving the safety and reliability of building products, and agreement to provide a voluntary pathway in the 2025 code for commercial buildings to measure their embedded carbon footprint, plus an investigation of a minimum standard on this in the 2028 code. 

It appears ICA will add the code changes to its list of recent wins, alongside increased disaster mitigation funding and the upcoming abolition of the NSW emergency services levy on insurance.

There’s plenty more to go at though – including putting an end to building on floodplains.

ICA has organised another land use planning forum for next month, to keep up the pressure on governments on this critical issue.

For more in-depth analysis, features and opinion, read the latest Insurance News magazine