Home Insurance Is Becoming Unaffordable For Parts Of Australia

Homeowners living near perceived flooding risks are seeing large hikes in their renewal policies – assuming they can find an insurer willing to cover them.

Last year’s floods across Eastern Australia cost insurers $4.7bn – the largest loss for the industry outside the USA in 2022.
It’s not just home insurance that’s affected. Plenty of cars were written off in the 2022 floods, and that’s also having an effect on vehicle premiums.
Insurers seem to be getting more cautious. The ABC has a story of a homeowner in Horsham, Victoria who saw a home insurance premium hike of nearly $9,000 despite not living in a flood risk area.

This all comes as Western Australia cleans up from their worst ever flooding in the northern Kimberley region.

Why are home insurance premiums going up in Australia?

Insurers took a big hit in 2022 and are needing to balance their books accordingly. 'Once in a lifetime' floods are becoming more common, and that means the firms that underwrite policies are raising their prices for properties considered risky.

The Australian Actuaries Home Insurance Affordability (AAHIA) Index estimates one million households – or 10% of Australia – will need to set aside one month’s salary just to afford home insurance.

In some cases, insurers are refusing to cover certain properties or locations, or quoting premiums that are forcing some homeowners to forgo insurance altogether.
The Climate Council estimates over a quarter of properties in the electorate of Nicholls in Victoria, which includes areas like Shepparton and Echuca, could be uninsurable by 2030.
Other areas where premiums are becoming increasingly unaffordable include South East Queensland, and the area around Byron Bay and Ballina in northern NSW.

Be aware: even if you’re not in a flood area, it’s worth checking your policy.

Last year, we reported a change in the wording insurers use to define flood events, meaning some claims for water damage could be denied in the future.

The bottom line

Australia’s extreme weather events don’t just have an impact on those in the eye of the storm. Recent research suggests many of us are already paying more on our home and contents policies as insurers become more risk averse.

Looking ahead: Industry regulators AFCA and ASIC no longer view natural disasters such as flooding as “out of the ordinary”.

That suggests the watchdogs will be looking carefully at two things: how insurers build their products and pricing to account for floods, bushfires and other disasters, as well as how they help customers after a natural disaster.