Insurance and climate change – opportunities and threats
Climate change is both a threat and an opportunity. CommInsure's Jeffery Scott looks at how insurance will need to adapt to the new reality.
If you are a believer in climate change, the question is not whether the world is getting warmer, but why. Some scientists say it is due to sunspots, and it is a normal environmental condition that is not caused by human activities.
Others believe it is caused by carbon dioxide emissions (CO2) from the burning of fossil fuels and the reduction of forests that use CO2.
Climate change is both a threat and an opportunity.
Most people realise the link between general insurance claims and climate change.
The more extreme the weather, the more likely property damage will increase, and the more likely the threat of claims.
The opportunity results from more research being conducted in this area, and thus more accurate risk assessment is possible.
However, there has been far less analysis on how extreme climate change could affect the life insurance industry. Between 1980 and 2004, more than 600,000 deaths occurred because of flood, storm, or other weather-related conditions.
As the climate changes, different types of conditions will affect the health and wellbeing of the population.
Climate change may also cause natural disasters that affect water supplies and spread water-borne diseases.
As the temperature rises, and precipitation changes, the most likely initial risk will be vector prone diseases.
These diseases thrive in warm, wet weather, and are often transmitted by mosquitoes or flies. The diseases include malaria, dengue fever, encephalitis and schistosomiasis.
Malaria causes over 2.7 million deaths each year. Dengue causes severe fevers and reduces a person’s immune system. Encephalitis causes inflammation of the brain. Schistosomiasis is the second most common tropical disease (after malaria).
These diseases are already prevalent in neighbouring countries like Indonesia, Fiji, Papua New Guinea and the Philippines.
It is suggested that within the next 15 years, the Australian climate will be ideal for the spread of these diseases. And while these diseases are prevalent in third world countries, developed nations are ill-prepared.
With changes in climate come changes in animal populations. Since 1980, there have been 17 mice plagues in Australia (seven in Queensland, three in New South Wales, three in South Australia, and four in Victoria).
While mice cause significant destruction to crops, the Hantavirus Pulmonary Syndrome is far more worrisome.
This deadly lung infection has a mortality rate of 50 per cent, and no known vaccine. This disease is contracted when people breathe in dust that is contaminated with saliva, urine, or excreta from infected rodents. In the 1800s this was commonly known as the ‘Black Death’.
The CSIRO believes the next mice plague will hit Australia by 2011.
As we have recently witnessed in Queensland, changes in weather patterns can result in rains that cause flooding. In severe cases, this may contaminate water supplies with such diseases as pfiesteria, cryptosporidium or toxoplasmosis.
Pfiesteria is a toxic infection that can result in severe health problems. Cryptosporidium is a small parasitic organism that infects the small intestine, resulting in diarrhoea, vomiting, stomach cramps and fever.
Toxoplasmosis affects more than 60 million people globally and is caused by water supplies contaminated by animal faeces (such as livestock manure).
On the other hand, extreme heat without rain may result in excessively dry conditions that promote the growth of algae in lakes and riverbeds.
These are the perfect conditions for the growth of vibrio cholera in water supplies. With human infection comes severe diarrhoea, vomiting, leg cramps and rapid loss of body fluids. Without treatment, death can occur within hours.
Unseasonably high temperatures cause heat stress to individuals. Those who experience breathing problems such as asthma, bronchitis or emphysema will have more difficulty as temperatures continue to increase.
It is anticipated that an increase of three degrees in average temperature will increase the annual death toll by more than 10 per cent.
What does this mean to your clients?
The risks that average Australians face are constantly changing and while mortality/morbidity rates have improved with enhancements in medical diagnosis and treatment, there are many new and long recurring risks lurking in the background.
Without sounding alarmist, some of these risks — particularly flood, bushfires and some emerging sicknesses — strike without warning.
Give your clients peace of mind and ensure they have adequate cover in place for term, trauma, total and permanent disablement (TPD) and income protection.
Jeffrey Scott is executive manager, Business Growth Services, CommInsure.
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