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Climate change needs to be considered
5 February 2009
Drought and flooding rains may be the hallmark of the sunburnt country, but over the past few years Australia’s uncompromising wild weather has also underlined the crucial need to protect yourself against the risks that climate change is bringing.

Researchers suggest that current climate change trends show an increase in severe weather events is likely, with more heatwaves and drought, and more storms and floods.

Industry experts say December’s $400 million Sydney hailstorm and the $1.4 billion Newcastle floods in June last year indicate a permanent change in weather patterns.

The more cynical might instead suggest these events represent little more than a belligerent yet normal cycle of wet La Nina weather.

At the very least, floods and storms are a reminder of the variable Australian climate, and the role insurance plays in protecting us against the inherent risks.

The past 12 months have already cost the Australian insurance industry an estimated $2.2 billion in insured losses, according to the Insurance Council of Australia.

And that has an impact on insurers. Between them, Australia’s four largest insurers incurred a 27% hit in half-year profits.

The current moderate La Nina spell is scheduled to tail off in the next few months, having certainly made its presence felt in many parts of Australia nearly 20 years after the last strong wet phase between 1988 and 1989.

All this weather activity, combined with Australians’ tendency to gravitate towards the coast, suggests that to remain underinsured when homes, contents and businesses are at risk is to run counter to common sense.

While flood is typically listed as an automatic exclusion on insurance policies in Australia, the good news is that we can sometimes have the clause deleted on commercial policies as long as the business is not especially flood-prone.

Aside from the obvious policies that cover plant and equipment, a business interruption policy is one example of the protection that exists to cover commercial clients in the event Mother Nature makes an uninvited call.

A business interruption policy will cover losses if damage from a storm makes it necessary for the business to stop trading.When this happens, the policy may just prove to be a lifeline.

Just ask the business owner in Newcastle, New South Wales, who was a very relieved man when he learned he was covered not only for stock and equipment but also lost trade after floods wiped out his business last year.

“If our broker hadn’t talked us into that business interruption policy I don’t know where we’d be,” he said.

It’s a good news story, but widespread floods also have their victims.

Consider the flood’s effect on the underinsured and uninsured traders of the Newcastle suburb of Wallsend, home to a number of sole proprietors.

A small tweak of the budget would have ensured protection against the high-flowing stormwater, but sadly many had chosen not to have any insurance at all.

These traders were at the mercy of emergency funds from federal and state governments, the safety net of last resort. These funds are by no means guaranteed and may extend only to clean up costs and basic restoration work.

It’s no way to run a business, that’s for sure. Businesses usually require an enormous commitment in time and money from their owners. They should be protected against foreseeable risks. Talk to us about the best ways to protect your investment.
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