Home Insurance Unaffordable in Australia


Home insurance premium in Australia grew by 5.9% in 2021 which is the highest in the last seven years. Driven by rising insurance costs due to increased frequency of natural disasters in the country, the average home insurance premium in Australia is expected grow from AUD830.6 in 2021 to AUD916.9 in 2026, according to GlobalData.

The impact of natural catastrophe events is most severe on Personal property insurance which accounted for 80% of claims that occurred in 2021.

Swarup Kumar Sahoo, Senior Insurance Analyst at GlobalData, comments: “This will have significant impact on home insurance premiums as insurers will pass this to the consumers to recover the losses. Rising insurance costs and increased frequency of natural disasters will leave around 4% of the Australian homes uninsurable by 2030.”

Home insurance prices in Australia registered significant growth after every natural disaster. Northern Australia, which is prone to natural disasters, registered growth in both claims and premiums during the last five years. Natural disasters in 2019 increased average premiums on home insurance by 20% in this region compared to 11% in the rest of Australia.

Similarly, recent floods in February and March 2022 which caused an insured loss of US$3.35bn, is expected to further increase home insurance prices in 2022.

Sahoo adds: “Increase in home insurance premiums will lead to underinsurance or no insurance as lower and middle-income groups will look to reduce policy coverage if they are unable to afford high premiums.”

To address the rising premium price in northern Australia, the government has come up with reinsurance pool worth AUD10bn in 2021. The pool will cover 880,000 residential, strata and small business property insurance policies. This is expected to provide 46% discount on premium for homeowners, 58% discount to strata properties and 34% discount to SMEs.

Sahoo concludes: “Government initiatives such as creating a reinsurance pool as well as better planning for land use and building sustainable homes will support in controlling the growth in average home insurance prices, which is expected to increase at a lower CAGR of 2.0% during 2021-26 compared to 2017-21.”


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