Profiteering from Disaster: Why Planners Need to be Paying More Attention to Insurance

ABSTRACT

Insurance is overlooked in planning practice and research. Focusing on house and contents insurance in Australia’s disaster-prone areas, I describe why the impacts of insurance availability and pricing on urban form requires greater attention from planners. With increasing climate change-related risks, the growing influence of insurance and insurers is exacerbating social and financial inequity: fostering disadvantaged enclaves and protected pockets of wealth, and sustaining insurer profits. I call for the better integration of insurance within planning, particularly a more considered and careful mobilization of insurance in disaster preparation. I present four research questions for advancing planning in disaster-prone urban areas.

KEYWORDS:

• Disasters
• climate change
• housing
• insurance
• financialization

Notes

1. Outside of economics and finance, this lack of research is also evident more generally within the social sciences (exceptions include Grove, 2010, 2012; Lobo-Guerrera, 2010, 2011; Johnson, 2015; O’Hare et al., 2015; Penning-Rowsell, 2015; Booth & Harwood, 2016).

2. Where an insurance payout is triggered by an event, it is not premised on actual losses but on occurrence of that event. For example, weather derivatives allow individuals or bodies to ‘hedge’ against extreme weather events and receive a payout based on the event rather than a calculation of losses.

3. Block (2006) provides an extreme example of this type of disaster research. He advocates a complete withdrawal of public finances in disaster recovery, calling instead on private enterprise and private charity as the basis for market-driven recovery.

4. French et al. (2011) identify three definitions of financialization of which the ‘financialization of everyday life’ is one. Pike and Pollard (2010) identify two additional conceptions, while stating that all conceptualizations are in broad agreement that financialization is ‘associated with widening and deepening the reach of financial interest in ways that pervade the agency, spaces, and places of existing and new actors and sites’ (Pike & Pollard, 2010, p. 33).

5. Ewald describes insurance as an ‘art of combining various elements of economic and social reality according to a set of specific rules’ (Ewald, 1991, p. 197). At particular points in time insurance institutions take on different forms—different combinations—depending upon the societal factors that constitute the market, such as the economic, the political, the moral and the juridical. Differing technologies of risk—different insurance technologies—develop and are used in various ways.

6. A form of life assurance, pension annuity that ‘allows for the transformation of a lump sum on retirement (the pensions pot accrued during working life) into a set of regular (usually monthly) pension payments paid until the death of the annuitant’ (French & Kneale, 2012, p. 394).

7. This taskforce was headed by a former Executive Director in the Australian Treasury and included a Reference Panel comprising representatives from three insurance bodies, a government reinsurance agency, a state government, a non-government organization, and a consumer advocate.