The Australian Insurance Industry has warned that insurance premiums will continue to rise as the frequency and severity of extreme weather events intensifies due to climate change. As one of the largest drivers of inflation, the sharp rise in home and car insurance premiums is a double whammy for homeowners already facing cost of living pressures. Despite these financial challenges however, it’s important not to underestimate the importance of maintaining sufficient insurance cover.

The Impact of Extreme Weather Events

Insurance experts say climate change is increasing the frequency of natural disasters, such as floods and cyclones, placing upward pressure on insurance premiums. Unless better planning laws and investment infrastructure are introduced to reduce the cost of natural disasters, this trend is likely to continue.

There are three factors pushing up premiums, says Insurance Council chief executive Andrew Hall: high-loss extreme weather events, rising re-insurance costs, and high rates of construction inflation, which made it more expensive to rebuild a home.

“The impact of rising costs, particularly the impact of extreme weather, meant Australian insurers experienced a net loss on home insurance policies in the 2022-23 financial year,” Mr Hall said.

“Climate change, but even more so value growth and urbanisation in harm’s way – on coastlines, former flood zones and into the wilderness – turn extreme weather into ever larger insurance losses when affecting urban centres.”

Mr Hall said making insurance more affordable required long-term policies such as improved land use planning, better building standards, and investment in community risk mitigation infrastructure.

Strategic Measures to Address Rising Premiums

When it comes to addressing the issue of rising insurance premiums, there are some strategies that may help:

1. Increase your excess: Opting for a higher excess amount can help reduce your insurance premiums. However, it's essential you strike the right balance and ensure that your excess amount is still affordable should you need to lodge a claim.
2. Evaluate your policy: Instead of cancelling your insurance policy outright, work with an insurance adviser to assess your coverage needs and identify areas where you could potentially save. Switching to a more limited cover which still offers essential protection but at a lower price, could help ease your budget while still maintaining adequate cover.
3. Explore discounts and incentives: Some insurance providers offer discounts and incentives to policy holders who bundle multiple policies together (e.g., home and contents insurance), maintain a claim-free history, install security systems (e.g., alarms, CCTV), or opt for annual premium payments instead of monthly instalments. It’s worth exploring these options as these could help lower your insurance costs.
4. Mitigate your risk: Taking proactive measures to mitigate risk and reduce the likelihood of insurance claims – such as improved land use planning, better building standards, and community infrastructure – could potentially lower your insurance premiums.
5. Get expert advice: Consulting with an insurance broker – such as those at Astute Financial – can provide valuable insight and guidance. Astute Insurance Brokers can conduct a comprehensive review of your existing insurance, identify any gaps in your cover, and recommend alternative solutions tailored to your specific needs and budget.

Prioritising Essential Insurance

Even in times of financial stress, it’s essential not to overlook the importance of having adequate insurance cover. Book an insurance review with an Astute Financial Insurance Broker, who can provide valuable insight and help you identify changes to existing policies to enhance your cover and fit your budget. Book a review today and get peace of mind and financial security.

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