Insurance premiums rising faster than inflation, data shows

Insurance premiums are rising at a rate not seen for two decades on the back of extreme weather events.

Insurance premiums are rising faster than inflation, new research has found, and Aussies doing it tough are being hurt even further.

Last week’s Consumer Price Index (CPI) figures showed home and car insurance premiums were one of the main drivers of inflation, with an average 16 per cent increase that dwarfed the overall inflation rate of 4.1 per cent.

The price increases are forcing some Aussies to drop their home and vehicle cover entirely, leading to big swathes of the country being exposed to potential financial ruin.

Why are insurance premiums rising so fast?

The short answer is climate change. With fires, floods and other natural disasters becoming more frequent, insurers say they are being forced to lift premiums in order to stay in business.

Andrew Hall, chief executive of the Insurance Council of Australia, told a federal parliamentary inquiry on Monday that planning laws needed to be changed to prohibit buildings in ‘high-risk’ areas.

He says lax planning regulations are “unnecessarily worsening” the impact of extreme weather events.

“Wherever you live in Australia, whether you’re directly exposed to extreme weather impacts or not, premiums are rising because of the escalating costs of natural disasters … inflation driving up building and vehicle repair costs and the increasing cost of capital for insurance,” Mr Hall said.

He defended the decisions, arguing that extreme weather and high costs of labour, building replacement, car parts and repairs mean above-inflation increases are necessary.

Economics professor Paula Jarzabkowski, from the University of Queensland, told Guardian Australia that price hike cycles are common after a natural disaster, but the frequency of recent events hasn’t given premiums time to go down again.

“You usually get a spike in premiums for a year or two after a disaster and then it all settles back down again,” she said.

“What we’re seeing now is a fundamental change in the way the insurance market works.

“You’re going to find that some people simply can’t afford insurance and so they will drop out of the market. We’ve built in places we probably shouldn’t have built in and, after climate change, they’re definitely not robust.”

Problem not spread evenly

The situation isn’t spread evenly across the nation either. Although average premiums rose by 16 per cent overall, in high-risk areas premiums have jumped by more than 50 per cent in the last year.

Research from the Climate Council found most ‘uninsurable’ federal electorates were located in NSW and Queensland, with some notable exceptions.

By 2030, the Climate Council says 15 per cent of the houses in the electorates of Nicholls and Indi (Victoria), Richmond and Page (NSW), Maranoa, Moncrieff, Wright, Brisbane and Griffith (all in Queensland), and Hindmarsh (SA) will be functionally ‘uninsurable’.

From the same data, it’s estimated that 40 federal electorates across Australia will have at least four per cent of properties classified as uninsurable. Eighteen of these electorates (or 45 per cent) are in Queensland.

Has your home insurance skyrocketed recently? Do you live in one of these high-risk electorates? Let us know in the comments section below.

Also read: Law firm claims insurers are punishing loyal customers

Written by Brad Lockyer

Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.

8 Comments

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  1. Ten years ago my home and contents insurance was around $500pa now the same policy is around $5,000 pa. Being on an age pension insurance became unaffordable about seven years ago and I no longer have it. I am in FNQ so we are in a cyclone area. The previous LNP federal government introduced some sort of scheme that was supposed to lower our insurance costs but it did not help at all as premiums are rising faster than ever. For many people insurance has become unaffordable and we no longer have it.

  2. If you think its dear now just wait till the predicted floods hit in 2025 The height of water will be in line with 1728 floods which according to the blackfellows history, we have never seen before and this is through studying the solar system and places that went under a few years ago will be gone and is a very simple reason not to build on flood plains

  3. We cannot afford to insure our new home because it is clad with EPS and very few insurers will cover houses with EPS cladding because a particular type of styro cladding used decades ago was flammable and led to substantial claims. This is absurd. The faulty product was banned decades ago and EPS is now high quality, extremely durable, fireproof, low cost to replace if damaged, and has high insulation value, making it an excellent choice for cladding and one that leads to LOWER insurance claims. The policies of underwriters are seriously outdated and irrelevant.
    After consulting with the supplier of the product, I sent a report and results of compliance testing to an insurance company demanding that they have their underwriter respond in writing detailing their reasons for refusing cover so I can take this up with government authorities and in the media.
    I think consumers need to be proactive now to force insurance companies to treat consumers fairly. I can see why premiums need to be high in areas where risks are substantial, but where risks are low insurance costs should reflect the low risk. In high-risk areas, there needs to be some government assistance to cover premiums – which would cost the public far less than the government covering the cost of repair and replacement after a disaster happens. But if insurers keep hiking their premiums the way they have been, insurance will become an unaffordable luxury. Then when a disaster happens, the uninsured join the homeless, and another social and economic problem grows.
    I feel sorry for people in flood and cyclone areas. It must be very scary living in high-risk areas and unable to afford insurance.

  4. Hi Lorraine, what response have you had with this: –
    “After consulting with the supplier of the product, I sent a report and results of compliance testing to an insurance company demanding that they have their underwriter respond in writing detailing their reasons for refusing cover so I can take this up with government authorities and in the media.”

  5. The weather has hardly changed over the last 200 years with fires, floods and cyclones.
    What has changed is that there is a hysteria being created by the media, politicians, activists, weather bureaus, etc.
    There causes which can be sheeted back to allowing homes to be built on flood prone areas, and in fire prone bushlands, and the action of authorities over the years.
    In respect to fires, all the money being spent as part of the insurance levees is being spent on so called overseas experts being employed on high salaries and on equipment to fight large fires.
    instead they should be taking actions to prevent or minimise fires, by building firebreaks, educating people, clearing roadsides and properties opening fire access tracks suitable for fire vehicles. together policies to enforce clearing around famland and properties, particularly those abbutting fire prone areas.
    Governments should ensure that a plan is in place to relocate properties and people in flood prone areas over a set timeframe of say fifty years.
    In cyclone areas building codes and infrastructure should be comeasurate with the areas.

    If these actions are taken promptly it with drive down insurance costs and premiums.

  6. We live in a very low flood/fire risk area of NSW yet our house & contents insurance went up 73.6% over last year’s premium. I am sick of paying for other peoples negligence in purchasing cheap flood/fire/cyclone prone land areas and expecting others to pick up their tab.

  7. All insurers in history have put their premiums up whenever an unusual increase of claims have been made. Look at the amount of money they have and you will find that their funds have increased phenomenally over the past 20 years. Even with lowering the risk do you think it will reduce premiums. Think again.

  8. As I am on an aged pension, I am discussed at the insurance companies. I was paying $271 a month for my home & contents cover from January 2023. When my renewal came out this January, it was $697 a month. I rang to clarify and was told that it went up that much, I could not believe what she told me. She said that all policy holders pay to cover everyone. I immediately cancelled my policy.
    I live in a very low risk area, on 5 acres, storms and floods have never hit us. I want a policy with no flood, earthquake and tsunami cover. I now am hoping to find another company that will sell me what I need and want. Wish me luck!

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