Home owners struggle as insurance premiums rise 51pc in five years

Since the Black Summer bushfires, the cost of home insurance for Paul and Denise Cameron has almost doubled.

The retired couple, who live in Dargen, near the New South Wales Blue Mountains, built their home in the months before the catastrophic event.

"The fire came right up to the front of the house [and] took out a few of the trees along the front," Mr Cameron said.

"In one sense, I think we were lucky because the fire went sort of around us rather than straight through as it did at the other end of the street."

The annual cost to insure their home has increased from $2,603 in 2019 to $5,071 today.

That is after a 30 per cent discount from their provider, NRMA, because they hold multiple policies and have been a customer for 50 years.

They shopped around, but ultimately, only NRMA would insure them.

The average cost of home insurance has increased by 51 per cent across Australia over the past five years, according to analytics firm Finity.

In 2020, the average cost for home insurance was $1,940. By October of last year, that number was $2,938.

Darwin the most expensive city for home insurance

When looking around the country, Finity data shows residents in Darwin pay the most for home insurance, followed by Sydney and Brisbane.

The most expensive areas to insure a property are the ones hit hardest by natural disasters.

Residents in Brisbane's west pay the most, averaging $8,396 a year, with residents in Darwin City and Sydney's outer west and Blue Mountains region averaging $5,410 and $5,350, respectively.

According to documents seen by the ABC, a Brisbane woman, who was affected by the 2011 and 2022 floods, was quoted $70,000 a year by Suncorp and $60,000 a year by Suncorp's subsidiary AAMI when searching for a new insurance provider last year.

In response, a Suncorp spokesperson said in a statement that insurance premiums continued to be affected by "the increasing frequency and severity of extreme weather events, rising construction costs, and persistent inflation, challenges that impact insurance affordability for all Australians".

"Suncorp employs sophisticated data modelling techniques and comprehensive risk assessment methodologies to determine premiums for individual properties," the spokesperson said.

Two major contributors to premium increase

Finity principal Stephen Lau said an increase in disasters caused by climate change and an increase in building costs have been the main drivers for insurance price hikes.

"That premium reflects the underlying risk that the insurers face," he said.

"So, if you live in a high-risk flood area, or if you live in a high-risk bushfire area, you're likely to be charged a higher premium because it reflects that potential risk that home is facing.

"If you looked at the materials and the building's costs, and to some degree the labour costs required to help rebuild and repair homes, a lot of that work is very high [cost]."

Mr Lau said "insurers were dealing with around 300,000 claims or more" for the 2022 floods, putting pressure on demand for repairs and building materials.

Reducing the risk to your home

The Camerons worked with the Resilience Building Council (RBC), which provides a free service to support homeowners in reducing the risks of natural disasters on their homes, which will hopefully also lower their premiums.

CEO and founder Kate Cotter said the RBC supported home owners to take "specific actions" to reduce the risk to their properties and measure the risk through a ratings program that ranges from one to five stars.

"That might mean for flood, that we strengthen that structure so its walls and foundations don't fail in a flood event … we might change out floor materials and wall materials so it doesn't suffer so much damage," she said.

For other disasters, the action plan will focus on different parts of the home.

"For storms, taking action might look like protecting windows and secure roofing … for bushfires, there are lots of small actions you can take, like ember screens, cleaning up flammable materials around the home," Ms Cotter said.

"Insurers are able to price that resilience into premiums now and not just offer insurance, but also be able to reduce premiums."

For the Camerons, it wiped about $500 off their annual premium, as they had built their home with fire risk in mind.

"I sent in a variety of photographs [to the RBC] … and they sent me a certificate which I then presented to the insurance company and the insurance company eventually took it into account," Mr Cameron said.

But for others, affording insurance remains a real struggle.

According to Actuaries Institute data, 15 per cent of Australian households cannot afford home insurance, something Ms Cotter worries will only grow.

"The trajectory is only going in one direction, so unless we take action and adapt our buildings and also reduce risk at the community level, those two actions need to happen to ensure that we've got a functioning insurance market," Ms Cotter said.

The Insurance Council of Australia said that since 2020, extreme weather events had cost insurers a total of $25.3 billion, which is an average of $4.8 billion per year, up 38 per cent from the previous five years.

"Insurers and government have been leaning in to tackle Australia’s protection gap, including looking at best practice public-private-partnerships overseas," an Insurance Council of Australia spokesperson said.

"We're in discussion with the federal government about what would be effective in the Australian context across mitigation and adaptation, land use planning, and appropriate partnerships between industry and government."

Impacts on businesses rising

Businesses are also suffering, with insurance comparison site BizCover data showing business claims for severe weather events had almost doubled in the last three years.

Power outages, fires and storm damage rank as the top threats to business operations nationwide.

"It doesn't take a massive event to impact a small business, even something like a heatwave that can damage power supply really means that small businesses can't operate," said BizCover general manager Brad Miller.

In some states, severe weather event claims are the second most reported incident behind theft, with claims averaging $39,000, but reaching as high as $200,000.

Mr Miller advised businesses to shop around to compare insurance options and have a plan B.

"It's important for companies to go and have backup power options, look for surge protectors, any kind of fire mitigation strategies at potentially other locations where they can operate from and have very good tested disaster recovery plans so their outage is minimised," he said.