Experts issue warning that huge number of homes could soon become uninsurable: ‘There is no doubt’

Home insurance challenges are rising in Australia with increasing global temperatures.

As The Conversation detailed, one in 10 homes in Australia will be uninsurable within the next decade — and the publication pointed to possible lessons to learn from California.

What’s happening?

According to analysis from Climate Valuation, summarized by ABC News, there are about 380,000 homes in Australia that are uninsurable or too expensive to insure — equivalent to about one in 20 homes. By 2035, this figure could increase to one in every 10 homes.

“There is no doubt an increasing proportion of rural and regional Australia is becoming uninsurable under the current system,” said Australian community lawyer Denis Nelthorpe, per ABC. “There’s lots of people being told that we won’t cover you for flood; if you want flood cover, it’s going to be $20,000.”

The Guardian summarized a National Climate Risk Assessment, which noted Australia is being heavily impacted by disasters amplified by rising global temperatures, including wildfires, flooding, extreme heat, and even changes in snowfall.

Due to greater risk, insurers raise their premiums to help cover the potential greater losses, as The Conversation detailed. This has led average home insurance to rise by as much as 66% in the Greater Sydney area since 2020, per Green Central Banking. 

Also, according to a report from the Actuaries Institute in early 2024, 1.6 million Australian households experienced some form of home insurance affordability pressure, and the percentage of households facing such pressure was on the rise.

Why are home insurance challenges concerning?

Human activities, such as burning dirty fuels for energy, have led to increasing global temperatures, which in turn has led to an increase in climate-driven disasters. Overall, extreme weather is happening more often and affecting more people. 

According to Australia’s first National Climate Risk Assessment, every community in the country is affected by the changing climate. The economy, food, and national health are impacted by it, as well as properties. 

Home insurance protects property owners from the burden of paying for damages and fixes. However, in the face of worsening extreme weather, insurance companies are either raising rates or not insuring homes entirely, leaving homeowners with the burden of paying for repairs. 

Furthermore, if a homeowner would like to sell their home, it could potentially be more difficult in the areas where homes are uninsurable or have high premiums. 

Climate Valuation chief executive Dr. Karl Mallon told ABC that banks could decline mortgage applications for these homes.

“That means that someone who’s got a property in a high-risk zone is going to be unable to sell that property,” Dr. Mallon said. “We’ll see communities where increasingly either people can’t sell a property, or they have to reduce the price so much that you can buy it without a mortgage.”

What’s being done about rising home insurance challenges?

“Communities will suffer the impacts of climate change in different ways at the same time and we’ll have a lot to manage,” said Chris Bowen, Australia’s energy and climate change minister, per The Guardian.

It’s vital to give homeowners peace of mind and protection in the face of disasters, and Australia has taken steps to protect homes in the face of dangers, as The Conversation indicated. 

In 2022, the government laid groundwork for restructuring insurance for cyclone-related damage. Additionally, the Australian Prudential Regulation Authority is conducting more research into how insurance affordability can change by 2050.

However, there is more that can be done to help. According to The Conversation’s piece, California may provide a roadmap for tackling this issue.

California faces a lot of the same climate threats as Australia and has made changes to its insurance rates. In California, home insurance agencies can set premiums with an emphasis on future computer models as long as there is expanded coverage in higher-risk areas. This legal requirement for more coverage is set to make prices more stable over time. 

If Australia adopts this method, The Conversation noted it could keep prices in the country stable and prevent sharp rises amid increasing risks.

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