When Disaster Strikes: Why so many Australians are inadequately insured

Insurance is increasingly identified as the disaster management technique of choice. Yet significant rates of non-insurance and under-insurance in Australia raise questions about the effectiveness of insurance in light of the predicted increase in natural disaster events.

While affordability is a recognised contributor for under-insurance, our pilot research indicates that insurance decision-making is informed by a range of complex and interconnected factors. We interviewed householders in areas at high risk of bushfire and identified four themes – trade-offs, networks, virtue and promise. We observe that householders undertake a range of trade-offs when deciding to purchase insurance and that these trade-offs are informed by family networks, social morality associated with who does and does not have insurance, uncertainty and anxiety created through a lack of transparency on behalf of insurers, and confusion about replacing household items that are hand-me-downs or second hand. Attempts at calculation for insurance coverage are driven by conflicting emotions, morality and the ‘broken promise’ of insurance, rather than financial accountancy. For our participants this provides a stronger logic for choosing not to have insurance than for having insurance. Such findings have significant implications for on-going research, and the utilisation and effectiveness of insurance in disaster management and planning.