Over recent years, we’ve seen numerous incidents of extreme weather affecting communities across Australia, and the homes and businesses located there.

From the bushfires of our 2019/20 summer to last year’s floods, the extreme weather has served as a reminder of just how vulnerable we are – and how important having the right levels of home insurance is.

As a consequence of those events, and of the predicted weather-related vulnerability that’s going to continue to impact Australia, home insurance premiums have risen significantly – while some properties in flood-prone areas, in particular, have encountered major difficulties getting cover in the first place.

Affordability of home insurance in Australia

Two recent reports from the Actuaries Institute have explored the impact of this on home insurance affordability and flood cost funding and discovered that in the year to the end of March 2023, home insurance premiums rose by an average of 28 percent.

For higher-risk properties, however, this figure was 50 percent.

This sharp increase in premiums has seen a consequential increase in the number of households facing home insurance affordability stress – defined by home insurance costing the equivalent of a month or more’s salary. That figure has risen from 10 percent to 12 percent, with home insurance costing an average of 8.8 weeks of annual income.

Local government areas suffering extreme home insurance affordability pressures are concentrated in Northern QLD, the Northern Rivers region of NSW, and Northern WA – and exposure to natural perils typically dominates premiums in these areas.

In addition, sums insured have also increased, contributing to the overall rise. The median and mean home insurance premiums have increased by 14 percent due to sums insured, which is an indication of inflation and supply chain shortages due to the war in Ukraine and COVID-19.

It is imperative, however, for anyone encountering home insurance stress to find a solution, as not being covered brings tremendous risk.

“Home insurance is incredibly important for all homeowners to protect their property,” says Brad Kelly, Division Manager at Gow-Gates.

“Over the past 12-18 months, premiums have steadily risen, and as the report outlines, these increases have resulted in home insurance stress for a number of households.

“It’s essential for anyone in this position – or, indeed, anyone whose premiums have increased, to speak with their broker to ensure they have the cover they need to protect their property.”

Reducing flood risk

In an additional report, the Actuaries Institute explored funding for flood costs. Flooding has caused some of the costliest natural disasters in Australia’s history, with the insured bill from the NSW Northern Rivers region floods in 2022 reaching $6bn, according to the Insurance Council of Australia.

Flood risk plays a major role in the current pressure on home insurance affordability, and flood risk now accounts for more than 50 percent of home insurance premiums for those in exposed areas, such as Southern Queensland and the Northern Rivers.

The key findings of the report include a call for governments to consider urgently introducing cost-sharing and cost-reduction measures to alleviate affordability stress; the strengthening and futureproofing of building codes and land use planning rules to improve the resilience of communities, and for everyone involved – including government and agencies – to collaborate and use technology to collect high-quality, up-to-date data to improve flood mapping and modelling.

“The insurance sector has a significant role to play, in partnership with government and other agencies and private sector businesses, to help create a sustainable way of both reducing flood risk and ensuring our homes and communities are protected,” says Brad Kelly

Australian weather outlook 2023-24

While significant work is being undertaken to help build more resilient communities and reduce the impact of weather-related damage, the short-term outlook points to more challenges on the horizon.

While last summer was affected by a La Niña weather pattern, which resulted in greater rain, this summer, we will experience an El Niño pattern – meaning drier weather and hotter temperatures.

The Seasonal Bushfire Outlook for 2023, recently published by the National Council for Fire and Emergency Services, outlined the increased threats posed by bushfires during the coming months, with many of those areas that suffered during the floods particularly at risk.

In a release to the media, Minister for Emergency Management, Murray Watt said: “After a few seasons of intense rainfall and floods, we know that there will be a lot of stress for communities.

“Many regions have seen lots of vegetation growth because of La Niña rainfall, which is contributing to increased risk.

"However, the Seasonal Outlook predicts more fast-moving grass and scrub fires, rather than the longer forest fires experienced in 2019-20.

“As Australia heads into its first significant fire season since Black Summer, it is crucial all three levels of government, along with emergency responders, are ready.”

Speak to your broker

Whether you’re experiencing home insurance stress or simply want to ensure your home insurance policy adequately covers your needs, speak to a Gow-Gates broker today.