Australia’s property insurance market is under immense strain as natural catastrophes, particularly floods, become more frequent and severe. For thousands of homeowners in disaster-prone areas, the cost of coverage has soared to unaffordable levels, with some premiums rising by more than 50% in recent years. Average home insurance premiums in areas at risk of flood - according to industry estimates - can reach upwards of $4,000 to $6,000 annually, compared to the national average of $1,500. In some communities, insurance is simply out of reach, leaving families exposed to financial ruin when disaster strikes.
Angela O’Neil (main picture, left) from repX, the insurance AR network, believes that while government initiatives like the Cyclone Reinsurance Pool and the Insurance Affordability and Natural Hazards Risk Reduction Taskforce are steps in the right direction, there is a critical gap in consultation. “It’s great that the taskforce has brought the insurers on board, but I don’t see enough about there being brokers involved as well,” said the general manager.
O’Neil said insurers bring considerable knowledge and expertise to these task forces but brokers should be there too because their role directly connects to property owners who are suffering the consequences of unaffordable or unavailable insurance. “We’re really talking about the end clients when it comes to the cost of insurance and that’s where I’m a little concerned because is the government getting the right advice from the right people?” she said.
O’Neill warned that government initiatives, like this task force, often fail to deliver meaningful change unless they are informed by a broad spectrum of industry voices. “It’s about getting the right advice and actually running with it,” she said. “That’s what I’m concerned about - we set up a task force or schemes, we get the information and then it doesn’t go anywhere.”
Katrina Shanks (main picture, right), CEO of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), sees another clear opportunity for government action: expanding the scope of the Cyclone Reinsurance Poo to cover areas at high risk of flood.
“I think it should be extended where there’s high risk,” said Shanks. “It shouldn’t be isolated to one type of event.”
She said this is “one key lever” available to the government. Shanks said the consequences of not using this lever and leaving people unprotected would be much greater: many businesses owners would not be able to recover from a disaster and would go out of business.
Another important lever could be difficult for the government to pull. The massive demand for housing is likely complicating efforts to draw a line in the sand on property developments in areas at risk of floods.
“I wish it were as simple as don’t build on flood zones anymore because it’s people’s homes, it’s people’s livelihoods a there’s a reason that they’re there,” said O’Neil.
However she urged stakeholders to re-consider planning laws given that large areas of key population centres including, Sydney and Penrith, will inevitably face flooding and mass destruction of homes again. “When that does happen, what do we do? We can’t just put them back up, we have to look at where we’re building,” said O’Neil.
Shanks said stopping building developments in high risk areas is one way the government can play a critical role to mitigate the impacts of nat cats like flooding. “There’s so much the government can do,” she said. “We continue today to allow building permits so buildings can be built in areas which we know are high risk and that is just simply nuts.”
Shanks also pointed to tax reform as a more practical lever:
“The lever that really interests me is the taxes and stamp duties for property - that’s a really easy lever to pull to reduce these taxes so insurances are more affordable for people,” said Shanks.
In some cases these taxes are more than 20% of the property premium.
As the cost of insurance continues to climb and natural catastrophes become more frequent, the message from the insurance industry is that government must move beyond committees and pilot programs to decisive, informed action. That means listening to a broader range of voices, investing in mitigation, rethinking where we build and using every lever, including tax reform, to ensure that property insurance remains within reach for all Australians, no matter where they live.
