1.6 Million Australian Homes Facing Financial Struggles with Home Insurance Costs: Actuaries Institute
The Actuaries Institute has reported that approximately 15 percent of Australian households are struggling to afford home insurance due to significant cost increases. This translates to about 1.61 million households whose insurance premiums exceed four weeks of their gross household income as of March this year. CEO Elayne Grace disclosed this information at a recent Senate inquiry hearing, highlighting the growing pressure on households.
In particular, South East Queensland has the highest concentration of households facing extreme affordability pressure, reflecting the region’s population growth. Additionally, regions like southwest Queensland, the Northern Rivers of New South Wales, and regional Western Australia are experiencing high percentages of households struggling with insurance affordability due to flood and cyclone risks.
Grace also noted that single seniors are especially susceptible to affordability pressure, as are households with mortgages. The rising cost of insurance has broader implications for the financial system, affecting mortgage affordability and availability.
Home Insurance Premium Increases
A recent report by the Actuaries Institute revealed that the median increase in home insurance premiums in Australia was 9 percent in the twelve months leading up to March. However, for properties with higher risks, premiums surged by over 30 percent. The report attributed a significant portion of the increase to rising reinsurance costs driven by escalating peril expenses.
Households under pressure due to insurance costs spent an average of 9.6 weeks of their gross income on premiums, significantly higher than the average household spending.
Peak Consumer Body Calls for Government Intervention
Tyrone Shandiman, chairman of the Australian Consumers Insurance Lobby, highlighted a market failure in the home insurance sector during a discussion on affordability. He mentioned a pensioner from Townsville, Queensland, who had to sell her unit because her insurance premium amounted to 40 percent of her pension. Shandiman emphasized the need for government intervention in addressing these issues and proposed sharing the burden of premium hikes among the government, consumers, and insurers.
In response, Elayne Grace emphasized the importance of carefully considering government interventions in the insurance market, citing examples from around the world where such interventions have led to unintended consequences. She specifically mentioned the risks associated with encouraging property development in flood-prone areas, drawing parallels with the challenges faced by the United States due to beach flood insurance policies.
