According to a new report by the Actuaries Institute, home insurance premiums in Australia have risen significantly in the past year, causing some households to consider abandoning insurance altogether. The report states that premiums have increased by 28 per cent overall, and up to 50 per cent in high-risk areas such as flood zones. This rise in premiums is linked to factors such as a slowing economy, 12 interest rate hikes, rising building costs due to the pandemic and inflation, and higher natural peril premiums in response to severe weather events.
The median home insurance premium now stands at $1894 per year, with the average premium being even higher at $2234 per year, a 46 per cent increase compared to the previous year. The report’s co-author, Sharanjit Paddam, predicts that these premiums will continue to rise as climate change leads to more frequent natural disasters. He warns that without policy action, more households may choose to forego insurance due to affordability pressures.
The hardest-hit households are those in flood-prone regions such as the Northern Rivers region of New South Wales, North Queensland, and Western Australia, where cyclone risk is high. Approximately 171,000 households across Australia are struggling with extreme affordability pressure, with riverine flood risk accounting for more than half of their home insurance premiums. Low-income households are particularly vulnerable to flood risk.
The report suggests that governments should consider options such as insurance or reinsurance pools for homes at high risk of riverine flood damage. It also highlights the impact of the federal government’s $10 billion cyclone reinsurance pool, which has reduced total cyclone premiums by 26 per cent and flood premiums by 9 per cent for households rated as cyclone-exposed. However, the pool is expected to have little or no impact on premiums for 87 per cent of homes in Australia.
The Actuaries Institute recommends exploring alternative revenue sources, such as replacing insurance taxes with more efficient options like stamp duty or emergency services levies. Risk reduction is seen as the key to addressing affordability stress caused by rising home insurance premiums.
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.