In August 2024, the Actuaries Institute stated that rising home insurance prices were causing financial strain for 1.6 million Australian households. This marked an increase of 360,000 households under stress, or 30% over the previous year.
According to Sharanjit Paddam, the lead author of the Actuaries Institute study, insurance premiums were rising faster than wages, with the median premium jumping by 9% the previous year.
Paddam argued that climate change is one of the factors driving up insurance premiums.
As a result, 15% of households expressed “home insurance affordability” concerns, up from 12% the previous year and far exceeding the 10% stressed in 2022.
The Actuaries Institute reported that affordability-stressed households spent an average of 9.6 weeks of their gross income on home insurance, which was seven times more than non-stressed households.
The graphic below from the Australian Bureau of Statistics (ABS) illustrates the significant inflation of insurance premiums.
Household insurance premiums increased by 11% in the calendar year 2024, down from a peak of 16.4% in the year ending March 2024.
The floods in southeast Queensland and northeast NSW have again put the cost of insurance firmly in the spotlight.
The Insurance Council of Australia (ICA) stated that insurance companies have already paid out $2.4 million to 6,000 customers impacted by Cyclone Alfred.
The ICA stated on Wednesday that 34,000 claims have so far been received across the cyclone-affected northern NSW and southeast Queensland, a 50% on Tuesday’s figures.
Speaking on the Gold Coast on Tuesday, opposition leader Peter Dutton repeated his threat to break up insurance companies if they engage in anticompetitive conduct.
“We will divest if that is what is required to get competition into the marketplace”, Dutton told reporters
Dutton said it was unacceptable that people in some parts of Australia either cannot get insurance coverage or have to pay huge premiums, which has forced some people to either drop their policies or reduce their level of cover.
“I’m not going to tolerate a situation where big insurance companies are lining their pockets with big profits while families are going without insurance or not able to sell the business because the bank won’t give them finance if there is not an insurance policy in place”, he said.
Dutton’s comments were at odds with some of his colleagues.
Deputy opposition leader, Sussan Ley, said on Monday: “We do not propose divestiture with respect to insurance companies”.
Shadow Treasurer Angus Taylor recently said that a Coalition government would not pursue break-up laws for insurance companies.
Leaked Coalition talking points also show that senior Liberals believed the party was against the divestiture policy until Dutton backed it on Tuesday.
Dutton’s proposed divestiture of insurance companies reeks of a political gimmick.
Despite the strong rise in premiums, Australian insurers lost more than $650 million on home insurance policies over the four years to 2023-24:
Last year’s Actuaries Institute report showed that the higher than 100% operating ratio in FY21 to FY23 showed that insurers continue to make underwriting losses on home insurance policies across the market:
While rising insurance premiums are undoubtedly contributing to Australia’s cost-of-living crisis and placing upward pressure on CPI inflation, there is no easy fix.
Unless Peter Dutton wants taxpayers to underwrite insurance directly and bear the costs and risks.
