With more than 2000 homes razed in bushfires across NSW since August, Douglas Driscoll, CEO of real estate group Starr Partners, is calling for the welfare and wellbeing of residents in these areas to be better protected – as well as their financial interests.

He warns that, as insurers begin to re-assess areas of risk, their classification of ‘red zones’ – areas where it is difficult to secure full home and contents insurance, or only for a very high premium – may spread, risking the economic viability of these communities.

"Under-insurance is also a very real problem and as we’re currently seeing across large parts of the State, it’s not until a disaster impacts on a household’s ability to rebuild that people realise what sort of insurance cover they may be missing," said Mr Driscoll.

"Likewise, I believe people looking to invest in these ‘red zones’ in the future could face significant obstacles. 

“For instance, getting home loan pre-approval from a bank or financial institution is a crucial part of the property buying process, however, if buyers are struggling to get home insurance, then banks will inevitably tighten their lending.”

Douglas’ warning comes off the back of figures released this month by the Insurance Council of Australia (ICA) in early January that show claims from Australia’s bushfire crisis have exceeded $700 million – and which, in light of more recent devastation, he predicts could easily top $1 billion. 

“We only have to look at the insurance cost of the Townsville flood devastation, which peaked at $1.24 billion, to know that both insurers and banks are jittery about insuring or lending on a property that is at risk of flood or fire," said Mr Driscoll.

"We may choose a property, but until we pay down the loan in full, the bank ultimately owns it, so they are right to be nervous.” 

With the spread of insurance ‘red zones’ set to have huge implications for the insurance, banking and property sectors, Mr Driscoll is calling for Federal, State and Local Governments to implement a “robust prevention plan. 

“Primarily, the Government needs to ensure that the future safety and wellbeing of residents in rural and regional areas is protected – as well as their economic interests," said Mr Driscoll.

"While it’s good to see they are already encouraging local tourism, they need to adopt further measures to keep money from leaving these areas. 

“For instance, the Government needs to put pressure on insurers to regulate against sharp premium increases in home insurance policies.

"They also need to devise a plan that will give the banks confidence to continue making loans readily available for people in fire or flood-ravaged areas.

"Ultimately, this will give reassurance to those households that have been affected, and future buyers.”

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