What can you do about rising insurance premiums?

According to the Actuaries Institute, home insurance premiums rose 28% to $1894 in the year to 31 March 2023. Households in the highest risk zones, such as those in flood-prone areas, saw their premiums rise by 50%.  

Additionally, the Actuaries Institute found that 1.24 million Australian households are facing home insurance affordability stress, spending on average 8.8 weeks of their income on home insurance – an increase on the 7.4 weeks of income reported last year.

The Institute attributed these higher costs to:

1. Significant increases in the cost of rebuilding a home, from supply-chain shortages, disaster-related surges in demand, and general inflationary increases;
2. Increases in natural peril premiums in response to large losses from the recent severe weather events; and
3. Increases in reinsurance premiums which are passed through to consumers in retail premiums or reduced coverage.

These findings align with reports and results from some of Australia’s major insurers. QBE group chief executive, Andrew Horton, told shareholders in QBE’s half-year report that gross written premium (GWP) growth of about 10% was forecast for the full year 2023:

"The ongoing impact of natural catastrophe activity in the first half should serve to maintain discipline in the industry, and we expect premium rates to remain supportive.”

Suncorp also recently released its full year results, which showed GWP growth of over 10%, reflecting “targeted price increases required to address material rises in reinsurance and natural hazard costs and economy-wide inflation.”

Suncorp chief executive, Steve Johnston, said:

“While Suncorp Group remains well protected through its comprehensive reinsurance program, over the last few years floods, fires and other natural disasters has resulted in a continued reassessment of risk by our reinsurance partners. This, combined with broader inflationary pressures across the economy, continues to impact the cost of reinsurance across the industry, and is a major contributor to the rising costs of everyone’s insurance premiums, particularly when household budgets are under pressure.”

A separate report from the Actuaries Institute looks at policy options for managing the rising flood costs for insurance, such as:

• Risk reduction: Mitigating or avoiding flood risks to naturally lower flood insurance premiums.
• Cost sharing: Having lower-risk households contribute more funds to help ease the burden on the highest-risk households, relieving the most acute affordability stress for those who reside in flood-prone areas.
• Government direct cost reduction: Having governments implement targeted subsidies and tax reforms to have an immediate impact on premium affordability, and to directly intervene through legislation or regulations to implement policies accelerating the lowering of affordability pressure.

At a household level, there are several options that individuals can consider to help manage their natural disaster risk and their insurance costs.  This can include:

• getting the house flood-ready
• checking your insurance covers bad weather damage
• Comparing the cost of alternative home insurance policies and considering switching insurers