Extreme weather and rising insurance premiums will make many Australian homes uninsurable

Article published 22 January 2024

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Rising insurance premiums leave many Australians in high-risk areas unable to afford insurance, and a new report says that these numbers are going to continue to go up.

Last year, CPSA published an article saying that half of the population in high-risk areas of Northern Queensland, Northern Western Australia and the Northern Rivers region of New South Wales were paying a month of their yearly household income on their annual home insurance premiums.

Now, 1 in 8 households across the country are paying out that amount, while at the same time, many households are uninsured or underinsured. In a submission to a federal inquiry into insurers’ responses to major floods in 2022, insurance company Allianz stated that nearly three quarters of households with the highest level of flood risk do not purchase flood cover.

However, this is not all that surprising given that, by the insurer’s own estimates, home and contents cover for a $500,000 house in a flood-prone area could be as high as $45,000 a year.

Extreme weather will worsen the problem

As extreme weather events become more and more common, more Australians are going to find themselves living in high risk areas for flooding, bushfires and cyclones. A recent report from the World Economic Forum has predicted that more than half a million Australian homes will be uninsurable by 2030.

This is also likely to hit low-income people hardest. In a study of Australian households conducted a few years ago, two academics from the University of Tasmania found that communities in disaster-prone areas were more likely to be disadvantaged, and that households in these communities were more likely to be uninsured.

For low-income homeowners who are already facing rising council rates and supermarket price gouging, insurance premiums are yet another cost that is proving unbearable for many.

What is being done?

There are calls for the government to step in and assist in a number of ways. Legislation could be introduced to force insurers to use standardized definitions of key terms like ‘storm surge’ and ‘fire’, so that customers can more easily compare plans and insurers cannot weasel out of paying out a claim. Better land use planning would also prevent developers from building on floodplains and in other high-risk areas so that future homeowners are not left paying the price for developers’ greed.

What can you do?

If you are struggling with rising insurance premiums, CHOICE has recently published a list of tips for choosing the right insurer. Some of their recommendations for keeping prices down include:

  • Shopping around to take advantage of deals or find insurers which beat competitors’ premiums,
  • Increasing your excess to reduce premiums, and
  • Bundling policies with the same insurer for a discount.

It’s also important to know what you are insuring against. Because different insurers can use different definitions for key terms, it’s always a good idea to ask your insurer to define their terms, and keep a record of their answers.

 Also read:

Is home insurance about to become a luxury?

Council rate changes to add further pressure on NSW households

For more information please email our media contact at media@cpsa.org.au

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