Households may abandon insurance as premiums soar
Some households may choose to abandon home insurance altogether as premiums soared 28 per cent in the past year and up to 50 per cent in high-risk areas such as flood zones, according to a new report.
Amid a slowing economy and 12 interest rate hikes in the past year, the report by the Actuaries Institute to be released on Monday found almost one in eight households – or 1.24 million dwellings – were facing “affordability stress”.
Home insurance premiums in flood-prone regions surged by 50 per cent in the past year. Glenn Hunt
Rising building costs – exacerbated by the pandemic, the war in Ukraine and inflation – higher natural peril premiums in response to recent severe weather events in recent years, and the tendency for reinsurers to pass on extra costs, contributed to the median home insurance premium increasing to $1894 a year.
The average home insurance premium was even higher at $2234 a year, a 46 per cent increase on 2022.
Report co-author Sharanjit Paddam said he expected home insurance premiums to keep rising as climate change resulted in natural disasters occurring more regularly.
As the premiums became more prohibitive, he expected more people to abandon insurance altogether.
“This is the largest increase in home insurance premiums I have ever seen over the last two decades,” Mr Paddam said.
“Based on science, we expect these home insurance affordability pressures are likely to continue to worsen due to climate change. If we don’t take policy action now, we can expect to have more people abandoning home insurance.”
The research report found the hardest-hit households were in the flood-prone Northern Rivers region of NSW, as well as North Queensland and Western Australia where cyclone risk was high.
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