Home insurance premiums have jumped by 28 per cent in the past year – the biggest rise in two decades – raising concerns that many Australian households may abandon their insurance altogether.
One year on from our publication, Home Insurance Affordability and Socioeconomic Equity in a Changing Climate, home insurance affordability remains a significant concern.
To highlight and address this issue, the Institute has published new research, Home Insurance Affordability Update and Funding for Flood Costs: Affordability, Availability and Public Policy Options.
Home Insurance Affordability Update examines home insurance affordability in the context of all natural perils, and found that the proportion of “affordability stressed” households – those that spend more than one month’s worth of their gross annual income on home insurance – rose from 10 to 12% in the year to 31 March 2023. These households spend on average 8.8 weeks of their income on home insurance, which is more than seven times what the average household spends.
The second report, Funding for Flood Costs: Affordability, Availability and Public Policy Options, examines riverine flood risk, which plays a significant role in the current pressure on home insurance affordability. The report outlines a package of short, medium, and long-term policy measures that should be considered by governments, insurers, and other stakeholders to reduce affordability stress for households who are also facing the highest risk.
Hear from the authors
Vanessa Beenders, Executive General Manager, Public Policy & Professionalism, sat down with both Sharanjit Paddam and Evelyn Chow to discuss key findings of the reports.
“At the moment, $1.5 billion is the size of the problem. That is our estimate of flood insurance that could already be considered unaffordable.” – Sharanjit Paddam
Sharanjit and Vanessa explore:
- The meaning of extreme affordability pressure and its drivers
- Affordability by local government area (LGA)
- How the different types of natural perils impact insurance affordability
- The expected impact of the Cyclone Reinsurance Pool on insurance affordability
“Risk reduction is the only way ultimately to address affordability stress by lowering the underlying risk and therefore costs in a sustainable way, especially when we factor in climate change.” – Evelyn Chow
Evelyn and Vanessa talk about:
- Why solutions for flood risks are so crucial
- The suite of potential solutions, including risk reduction, cost sharing and government direct cost reduction.
Read the reports: Home Insurance Affordability Update and Funding for Flood Costs: Affordability, Availability and Public Policy Options are available here.
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