Home Insurance Affordability Update and Funding for Flood Costs

One year on from the Actuaries Institute report, Home Insurance Affordability and Socioeconomic Equity in a Changing Climate, home insurance affordability remains a significant concern.   

To highlight and address this issue, the Institute has published new research, the Home Insurance Affordability Update and Funding for Flood Costs: Affordability, Availability and Public Policy Options. 

• Home insurance premiums rose 28% to $1,894 in the year to March 31, with the highest risk properties, such as those in flood-prone areas, up by 50%.   

• The proportion of “affordability stressed” households rose from 10 to 12%, spending on average 8.8 weeks of their income on home insurance. 1.24 million Australian households are facing home insurance affordability stress.  

• Flood risk, in particular riverine flood, plays a significant role in the current pressure on home insurance affordability. For 171,000 households across Australia, riverine flood risk contributes more than half of their home insurance premiums. If they were fully insured, the total flood premium for these households would be $1.5 billion per annum, or $8,800 on average per household.  This is the size of the current problem.

• Although many initiatives are underway, more could be done. The Institute supports a package of short, medium and long-term policy measures that should be considered by all stakeholders to reduce affordability stress, including risk reduction initiatives, reform of insurance-based taxes or targeted subsidies and, if policymakers decide relief needs to be accelerated, the introduction of interim cost-sharing measures like an insurance or reinsurance pool.