Australia’s climate risks making home insurance unaffordable: Report
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Median home insurance premiums in Australia surged 28 per cent to A$1,894 (S$1,700) in the year to March 31.
PHOTO: BLOOMBERG
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SYDNEY – Australian home insurance premiums jumped the most in two decades in the past year, driven by weather catastrophes and higher building costs, new research showed.
Median home insurance premiums surged 28 per cent to A$1,894 (S$1,700) in the year to March 31, according to a report released on Monday by the Actuaries Institute. Premiums for the highest-risk properties – such as those in flood- or bushfire-prone areas – shot up 50 per cent, it said.
The number of “affordability stressed” households – those spending more than one month’s worth of their gross annual income on home insurance – climbed to 1.24 million from one million households a year ago, with the overall proportion rising to 12 per cent from 10 per cent.
On average, those households spent 8.8 weeks of their income on home insurance. The new data comes as many Australian households are already struggling with elevated inflation, rising borrowing costs or soaring rents.
“Half the increase in home insurance premiums relates to building cost inflation, which has spiked during the past two years due to supply chain shortages,” said Mr Sharanjit Paddam, one of the report’s authors.
“There’s also been an increase in natural disasters and higher reinsurance costs, driven by the climate change impacts we’re already seeing.”
The hardest-hit households are in the flood-prone Northern Rivers region of New South Wales, as well as north Queensland and Western Australia, where cyclone risk is high, the research showed.
Extreme weather catastrophes are becoming more common around the globe, with climate scientists warning that one-in-100-year disasters will occur more frequently unless carbon emissions are reduced dramatically.
Prime Minister Anthony Albanese announced in July that Australia will join German Chancellor Olaf Scholz’s climate club to help expand international cooperation on tackling global warming amid record temperatures.
“Based on science, we expect these home insurance affordability pressures are likely to continue to worsen due to climate change,” Mr Paddam said.
“Without insurance, households will struggle to recover from disasters and governments, taxpayers, charities and many informal means of support will be left to assist.” BLOOMBERG
