Need to know
- Premiums have gone down by about 11% for households in medium-to-high-risk areas since the introduction of the government's reinsurance pool
- But people in high-risk areas such as North Queensland still pay twice as much as those who face negligible risks
- Across the rest of Australia, premiums continue to rise rapidly, and many homeowners fear they will be priced out of protecting their homes
Stories of people priced out of the home insurance market are not hard to come by in northern Australia, where the risk of extreme weather events have pushed premiums well out of reach for many households.
As anyone faced with such a predicament would know, not being able to afford to protect your most valuable asset when economic survival is already tenuous is a deeply personal issue. The financial futures of families and loved ones are on the line.
The Strata Community Association Queensland has cited cases of unit owners in Far North Queensland facing premiums of $13,500 a year.
The situation has gone critical in Northern Australia, but such stories are increasingly not hard to come by around the rest of Australia as well.
Over the past five years, cyclones and the like have led to $22.5 billion in claims payouts by Australian insurers – a 67% increase over the previous five years
As climate change ramps up the frequency and ferocity of natural disasters, some insurers have flat-out declined to offer cover in certain areas, leaving homeowners exposed to personal and financial catastrophe. Behind the scenes of devastation lie upended lives and communities that endure ongoing hardship.
Since 2020, there have been 14 weather events across Australia that were declared catastrophes either by state governments or the insurance industry or both, and eight other events where berserk weather wrought major damage.
Over the past five years, cyclones and the like have led to $22.5 billion in claims payouts by Australian insurers – a 67% increase over the previous five years. Premiums have gone up accordingly across Australia, but especially in North Queensland cities such as Townsville, Mackay, and Cairns.
In these areas, insurance unaffordability has escalated into a full-blown crisis.
Reinsurance pool helping a little
In 2022, the federal government established a cyclone reinsurance pool in an effort to bring premiums down in high-risk areas. (Reinsurance is what insurers take out to help cover the avalanche of claims that often follow cyclones and other weather events.)
Australia's biggest insurers were required to take part in the reinsurance pool by the end of 2023, while smaller ones had until the end of 2024.
Insurers pay premiums to the pool and can claim from it when an extreme weather event occurs. This safety net is supposed to mean they can offer lower premiums to homeowners, since the cost of reinsurance normally makes up about 17% of a homeowner's premium. And the pool seems to be working, at least to an extent.
The Australian Competition and Consumer Commission (ACCC), which was tasked with keeping an eye on whether the reinsurance pool was doing its job, recently released its fourth annual report on the subject.
There's good news and bad news. For insurance customers facing a medium to high risk of cyclones, premiums have gone down by about 11%.
Australians' worry about home insurance has never been higher, yet most remain in the dark about the reasons behind their soaring premiums
CHOICE campaigns and communications director Rosie Thomas
But chair of the Australian Consumers Insurance Lobby (ACIL) Tyrone Shandiman says people in high-risk areas still pay twice as much as those who face negligible risks.
"The gap is beginning to narrow – but more must be done to deliver fair and affordable premiums for Australians in disaster-prone regions. We cannot accept the current gap – over 100% – as the new normal."
Spokesperson for the Townsville Lot Owners Group Andrew Turnour says the government's reinsurance pool has brought about only "patchy reductions" for strata insurance in the region.
"Some worst-case victims are now being denied renewal insurance after their 2024 policies were jacked up by 35%," Turnour says. "The ACCC reported in 2016 that 17% of properties in North Queensland were uninsured. Recent estimates put that figure at 30%."
Many people in areas that are most at risk still have to go without home insurance, Shandiman says.
As for the rest of us, premiums have gone nowhere but up – in some cases way up.
"Premiums remain very high for many households and small businesses and are generally rising in most parts of the country," the ACCC said in late July when the report was released.
CHOICE campaigns and communications director Rosie Thomas says premium monitoring should be expanded beyond high-risk areas.
"According to our latest national surveys, Australians' worry about home insurance has never been higher. Yet, most remain in the dark about the reasons behind their soaring premiums," Thomas says,
"The ACCC's ongoing insurance monitoring is delivering crucial insight into premium trends. We're calling on the government to broaden the ACCC's remit, extending scrutiny to both car and home insurance markets, to ensure pricing is transparent and fair."
With the increasing frequency of catastrophic weather events, many insurers refuse to provide cover in high-risk areas.
Home insurance required for mortgage
In early July, a police officer and father or two who lives in the Sutherland Shire of Sydney contacted CHOICE with a tale that's become all too familiar.
"I've just been forced to make one of the most difficult decisions of my life – to go without home insurance for the first time in over a decade," James says.
"Why? Because my premiums have exploded from $2000 two years ago, to $3300 last year and now between $8000 and $11,000 this year — despite no change in my property, no new flood risk, and no excessive claims history."
One broker told me point blank 'our postcode has a blanket flood loading — it doesn't matter what your specific risk is'
Home insurance customer James
Leaving his home uninsured goes against the terms and conditions of his mortgage. "So I'm stuck between a rock and a hard place," James says.
His home is in an area that's been flagged as potentially prone to flooding on insurers' databases, but he recently obtained documents from the Sutherland Council indicating that his property is not at risk.
"Yet now, every insurer either refuses to quote or offers only unaffordable premiums," James says. "One broker told me point blank 'our postcode has a blanket flood loading — it doesn't matter what your specific risk is'."
Suncorp settles AFCA case
Another home insurance customer we recently heard from, Andrew, took his case to the Australian Financial Complaints Authority (AFCA) on the grounds that his Suncorp premiums had climbed 144% since 2019.
Andrew says Suncorp's explanations for steadily ratcheting up his premiums – which included an increase in the value of his land, the rate of inflation, weather events, improved risk data and rebuilding costs – amounted to a blanket justification that didn't align with reality.
"There have been no claims or changes to policy during this period," Andrew says. "When I questioned Suncorp about the reason for the increase, they blamed inflation and weather. I presented them with data to show that a 144% increase was unjustified."
The data included Bureau of Meteorology stats on weather activity in Southeast Queensland and Australian Bureau of Statistics (ABS) data on construction costs during the period he had a Suncorp policy. Andrew says Suncorp's explanations simply don't stack up against the evidence.
I presented them with data to show that a 144% increase was unjustified
Home insurance customer Andrew
As we have reported earlier, AFCA will only rule in a policyholder's favour if the insurer has made an error in calculating a premium increase. But determining what constitutes an error is not straightforward.
In November last year, AFCA's lead ombudsman for insurance, Emma Curtis, told us "we don't have the power to consider complaints just because someone is generally unhappy about the increase".
An AFCA determination that went against a homeowner who filed a complaint about a big premium increase says the agency "cannot consider a complaint about rating factors and weightings applied by the insurer to determine the base premium, which is commercially sensitive information".
But Andrew maintains that the flawed reasoning given by Suncorp for the premium increases over the years amounts to a series of errors.
He asked AFCA to force Suncorp to provide "a clear, transparent, and substantiated explanation for the premium increase" or recalculate his latest premium increase in line with historical inflation data published by the ABS.
After initially rebuffing his claims, the insurer ended up paying Andrew a settlement of $2500 to drop the AFCA case.
Unaffordable insurance 'a silent crisis'
James, from the Sutherland Shire, calls the lack of insurance affordability "a silent crisis for ordinary Australians".
"This isn't just happening to me," he says. "I've spoken to neighbours, friends in surrounding suburbs, and dozens of people in local community Facebook groups. Families who've paid their premiums for decades – some of whom have never made a claim – are now being quoted $7000, $9000, even over $12,000 for basic coverage."
"Many, like me, are being forced to go without. This is no longer about insurance — it's about who gets to live with financial security and who doesn't."
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