Major change that’s making Aussie insurance premiums cost more
Could it be time for the government to subsidise your home and contents insurance?
“These problems aren’t going away. They’ll get worse before they can get better.”
That’s the grim cost-of-living news from consumer watchdog CHOICE and the Climate Council, which commissioned a report on the impact of changing weather on insurance premiums.
It contains a survey of 1,037 homeowners and renters across Australia, which found nine out of 10 faced a cost increase when their policy was renewed.
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What are the main weather events impacting policyholders?
As well as facing policy increases, two in five respondents said they’d been impacted by extreme weather over the past five years.
This breakdown shows which events impacted those policyholders:
Heavy rain or flooding - 19 per cent
Hail damage - 13 per cent
Extreme wind - 10 per cent
Cyclones - 3 per cent
Bushfires - 7 per cent
Government 'obligated' to help policyholders impacted by extreme weather
As extreme weather becomes more frequent and severe, the report highlights a need for insurance terms to be reformed so consumers know exactly what events their policy covers.
Climate Council economist Dr Tim Nelson told Yahoo Finance that would mean some degree of standardisation of insurance terms.
The report also recommends Aussies living in areas affected by worsening extreme weather - through no fault of their own - should receive help to mitigate the cost of cover.
"Certainly the government has an obligation to trial subsidies for communities where insurance is now unaffordable, particularly for those consumers that are on low incomes," Nelson said.
To help those living in areas that are no longer safe, the report recommends National Cabinet agree on a consistent approach to planned relocation.
Why you're paying more for insurance
The findings were released just one day after Financial Services Minister Stephen Jones announced an inquiry into the 2022 floods that ravaged South-East Queensland and Northern NSW and caused almost $6 billion in damages.
While the inquiry will focus on the floods, it's expected to also touch on all 11 declared insurance catastrophes that have occurred since the Black Summer bushfires. Along with two significant insurance events, they’ve cost the insurance industry $13 billion.
In the 12 months leading up to June, Australian Bureau of Statistics data revealed insurance premiums rose by 14.2 per cent, much higher than rent - at 6.7 per cent.
The industry is facing significant threats from our era of climate change, so it makes sense insurance is costing more. The Insurance Council of Australia warned in its 2021/2022 report that it expected extreme weather to cost the industry $35.24 billion per annum in 26 years.
Should the government be subsidising my insurance?
Climate scientists have largely blamed the fossil fuel industry for creating the problems, and Australia’s state and federal governments gave $11.6 billion in subsidies to the sector over 2021-2022.
There are new projects being readied at the Northern Territory’s Beetaloo Basin and the Burrup Peninsula in Western Australia, which climate experts expect will further contribute to the destabilising of Australia’s weather.
State government land-clearing regulations are also a factor, as the destruction of forests they permit results in large amounts of carbon being released into the atmosphere.
The added costs of extreme weather events
Dozens of suburbs across Australia will increasingly become unliveable. The areas will either become too dangerous to live in, or the insurance industry will make cover unaffordable in order to reduce its own risk.
These events don’t just impact property, they upend lives, cost jobs, stop children going to school, and lead to long-term mental health effects. After the flooding in Lismore in 2022, more than 1300 people found themselves in emergency accommodation.
The CHOICE report recommends landlord insurance policies should be reformed to help renters when they are displaced.
"The design of landlord insurance policies means that landlords receive all the policy benefits of financial support while a home is being repaired, while people who rent receive no direct or indirect benefit from a landlord’s home insurance policy," it says.
The report was a collaboration by CHOICE, Climate Council, Financial Counselling Australia, Financial Rights Legal Centre, and the Tenants’ Union of NSW.
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