Homeowners demand transparency over rising insurance costs amid climate crisis
Homeowners demand transparency over rising insurance costs amid climate crisis | Insurance Business Australia
Insurance News
Homeowners demand transparency over rising insurance costs amid climate crisis
Senate inquiry explores insurance hikes as homeowners feel the pressure
Insurance News
By
Jonalyn Cueto
Malcolm Chew, a homeowner in the Hawkesbury district, has seen his insurance premium surge by 47.5% despite making only minor claims in over 30 years. His NSW property, well-protected against fire and other natural disasters, now costs more than $6,600 annually to insure, leaving him bewildered by the sudden spike.
Chew’s home, equipped with safety features like a sprinkler system, toughened glass, and a 120,000-litre water tank, received no recognition from his insurer when the premium increase was justified by a mix of inflation, building material costs, and vague references to claims in his area.
When queried, the insurer did not offer clarity on how Chew’s preventative measures impacted the cost, leaving him frustrated, The Guardian noted.
“Their words to me were, ‘it makes no difference but we appreciate the effort that you go to,’” Chew told The Guardian.
Surge in insurance premiums
Australia is grappling with an insurance affordability crisis, especially in areas prone to natural disasters. Many homeowners are being priced out of comprehensive coverage, a trend exacerbated by rising costs tied to extreme weather events and global inflationary pressures.
Reinsurers, who absorb some of the risks from natural disasters, have also raised their prices, further straining policyholders.
Despite the increasing costs being attributed to external factors like climate change, consumers are expressing frustration with the lack of transparency in how premiums are calculated. Chew’s discontent mirrors the broader dissatisfaction among Australians facing substantial hikes with little to no explanation. Some are switching insurers in search of better rates.
“They say thanks for your loyalty, then shove up the premium by 47%,” noted Chew, who moved some of his policies to rival companies.
The other end of the stick
The insurance industry, however, points to a confluence of rising labour costs, inflation, and more frequent natural disasters as justifications for the price increases. The Insurance Council of Australia, in its submission to a Senate inquiry into the impact of climate change on premiums, cited growing global losses from natural catastrophes, which have exceeded $100 billion annually for four consecutive years.
Still, the industry’s rising profit margins, such as IAG’s increase from 9.6% to 15.6% over the past year, have not gone unnoticed. This disparity between growing profits and escalating consumer costs has sparked criticism, especially from Greens Senator Mehreen Faruqi, who is leading the inquiry.
Faruqi stated that the climate crisis was adding to insurance costs, but that should not be used as an excuse to gouge consumers.
Experts agree that there is room for improvement in how individual risk profiles are assessed. University of Queensland’s Prof. Paula Jarzabkowski highlighted the need for insurers to better evaluate risk-reducing measures, like those implemented by Chew.
“We need to start understanding what things will genuinely make a difference to your risk profile and your likelihood to cause a claim,” she said.
Do you have any thoughts on this story? Let us know in the comments below.
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