1.6 Million Australian Households Struggling to Afford Home Insurance: Actuaries Institute

The Actuaries Institute has revealed that nearly one in six Australian households have difficulty paying for home insurance due to significant cost increases.
Actuaries Institute CEO Elayne Grace said the proportion of households facing extreme insurance affordability pressure was 15 percent as of March this year, up from 12 percent in 2023 and 10 percent in 2022.
“That means 1.61 million households in Australia have a household insurance premium quoted greater than four weeks of their gross household income,” she told recent Senate inquiry hearing.
According to Grace, South East Queensland had the highest number of households with extreme affordability pressure, reflecting the region’s significant population growth.
Meanwhile, high flood and cyclone risks were behind the highest percentage of households under affordability pressure observed in southwest Queensland, the Northern Rivers of New South Wales, and regional Western Australia.
“Half the population in these areas face home insurance premiums exceeding one month,” she said.
Grace said single seniors were likely to be subject to affordability pressure.
“In a previous report, we noted that those who face the greatest home insurance affordability pressure are more likely to be over 60, retired, single adult households, and have low savings and low insurance literacy,” she said.
At the same time, the CEO stated that around 5 percent of households with a mortgage had trouble paying insurance bills.
“This is equivalent to 180,000 households and represents 57 billion of home loans, 3 percent of all mortgages outstanding,” she said.
However, the rise was much greater for higher-risk properties, with households paying the top 5 percent of premiums reporting a surge of over 30 percent in insurance costs.
Around 7 percent of the median increase in 2024 was due to the hikes in other insurer costs, such as insurer expenses, profit margin, and reinsurance cost, while 1 percent was due to the increase in the cost of rebuilding a home.
“Home insurance premium increases are primarily a consequence of increased reinsurance costs during 2023, driven by rising costs of perils,” the Actuaries Institute said.
Shandiman cited the example of a pensioner in Townsville, Queensland, who had to sell her unit because she was being charged $16,000 (US$11,000), or 40 percent of her pension, for home insurance.
“That is just one example. But then you go to flood areas where you’ve got consumers paying $20,000. How is that not market failure?” he questioned.
“We’ve got data which shows consumers are paying 10 or 20 times as much for their insurance.”
While the chairman said he supported the free market, he argued the government needed to intervene when there was a market failure.
In his organisation’s submission to the Senate, Shandiman proposed that the government shoulder some of the insurance premium hikes.
“Someone has to pay for it that bit, and our submission suggests that it could be shared across government, consumers, and possibly insurers as well the insurance industry,” he said.
Meanwhile, Grace said government interventions in the insurance market must be carefully considered.
“We have seen globally where it has gone wrong. The first thing is you don’t want a government intervention that encourages property development in flood-prone areas,” she said.
Grace gave the example of the United States, where beach flood insurance was provided.
She added that the policy has encouraged property development in risky areas and caused significant problems for the U.S. government.