After its crushing win in the May election, productivity ranks high on the Albanese government’s domestic agenda, and it is among key issues to be discussed at an economic summit in Canberra next week.

Ahead of that meeting, the Productivity Commission has made draft proposals including the creation of a climate resilience rating system, which could have a direct bearing on home insurance premiums.

The commission says the rating system should reflect resilience against several climate risks, accounting for present and projected weather, topography and local hazards.

At present, there is little to encourage homeowners to invest in private mitigation measures, especially those in metropolitan areas where the risk of floods and other climate perils is substantially lower – for now – than in rural areas.

But climate change will happen over decades and, regardless of future emission reductions, Australia is expected to experience a harsher environment.

“Australians need resilient housing ... a resilience rating system will empower investment in resilience,” the commission said.

“The highest policy priority in establishing a resilience rating system is to lift the low levels of resilience in existing housing.”

The commission says its proposed system “could provide a basis for insurance pricing that incentivises resilience investment. For many households, insurance premiums are the most tangible signal of their exposure to climate risk.

“But current premiums do not reflect how climate risks will change over time, which is highly valuable information for people making long-lived investments in housing.

“The resilience rating system would fill that gap.”

The commission points to the Resilient Building Council’s bushfire resilience self-assessment app as an example where mitigation actions have led to reduced premiums.

The app details steps to improve a home’s bushfire resilience rating that are recognised by insurers through premium discounts.

In the app’s first six months, 6600 households had implemented at least four recommended actions, resulting in $44 million of bushfire resilience improvement.

“The RBC model provides proof of concept for how price signals and information on what works can drive private investment in resilience,” the commission said.

Resilient Building Council CEO Kate Cotter says the commission’s recommendation is “exactly the kind of shift we need”.

She told insuranceNEWS.com.au the bushfire app’s success “provides a strong blueprint for rapid national scale. It proves we can translate complex hazard science into an easy-to-use digital tool that empowers homeowners, guides cost-effective retrofits, reduces disaster risk, and unlocks insurance and mortgage discounts.”

The Resilient Building Council has now developed a multi-hazard resilience rating scheme that covers bushfires, floods, severe storms and tropical cyclones. Assessments are under way in every state and territory.

Ms Cotter says the ratings scheme “shows it’s both practical and feasible to deliver a nationally consistent resilience rating for homes – and it’s backed by federal, state and local governments, the insurance and banking sectors, and communities through direct funding, co-design and adoption.

“The interest in the success of our program to measure resilience, provide personalised action plans for every resident, and integrate with insurance and finance pricing has gained international interest and new partnerships.”

Finity principal Sharanjit Paddam says many insurers already recognise Resilient Building Council-certified ratings for bushfire, and that will extend to other perils.

“The RBC is providing vital information to homeowners on how they can improve the resilience of their homes and reduce their premiums,” he told insuranceNEWS.com.au.

“These resilience ratings help to build understanding and trust between homeowners, insurers, banks and government.

“Homeowners are much more likely to undertake resilience improvements when they know in advance that they will be rewarded with premium reductions.

“Having a common language will help everyone get together and solve the problem.”

In June, Prime Minister Anthony Albanese said his government “has secured a mandate to act”. Will he use it to drive resilience efforts? For the sake of millions of Australians whose homes are their most important assets, let’s hope so.