Australian households are facing escalating home insurance premiums as climate change intensifies the frequency and severity of natural disasters, according to a report released on Monday by the Actuaries Institute. The increasing costs not only strain family budgets but also pose significant concerns for lenders, regulators, and governments.
The report revealed that as of March 2024, 15% of Australian households were under home insurance affordability stress, defined as paying premiums exceeding four weeks' worth of their income. This equates to 1.61 million households, marking a 30% increase from the 1.24 million households affected a year earlier.
"Unfortunately, we expect this will continue because of the overall increasing risk of natural disasters associated with climate change, which will continue to put upward pressure on premiums," said the report's lead author, Sharanjit Paddam.
The surge in insurance costs has contributed to Australia's inflation rates and has raised alarms about the ability of homeowners to adequately protect their properties. High construction costs and elevated climate-related risks have left some individuals either underinsured or without any insurance coverage at all.
The report highlighted that 5% of households with home loans are experiencing extreme financial pressure, with annual insurance premiums averaging A$5,216 ($3,505), more than double the national average of A$2,124. These financially strained households collectively hold approximately A$57 billion in outstanding mortgage loans, accounting for 3% of all home loan assets as of March.
"If their home is damaged by a natural disaster and they either don't have insurance or are underinsured, they could find themselves in a stressful financial situation," Paddam warned.
The implications of widespread underinsurance extend beyond individual households, potentially impacting the stability of financial institutions and the broader economy. "So, this is potentially a problem that's bigger than just insurance. It's also a problem for lenders, regulators and governments," Paddam added.
Regional disparities were also evident in the report, with half of the households in southwestern Queensland, the Northern Rivers region of New South Wales, and regional Western Australia facing premiums that exceed one month's income due to heightened risks of floods and cyclones.
The growing unaffordability of home insurance underscores the urgent need for coordinated efforts to address climate change and its cascading effects on economic and social systems. Without effective interventions, more Australians may find themselves vulnerable to financial hardship in the wake of natural disasters.
(Source:www.uenews.com)
The report revealed that as of March 2024, 15% of Australian households were under home insurance affordability stress, defined as paying premiums exceeding four weeks' worth of their income. This equates to 1.61 million households, marking a 30% increase from the 1.24 million households affected a year earlier.
"Unfortunately, we expect this will continue because of the overall increasing risk of natural disasters associated with climate change, which will continue to put upward pressure on premiums," said the report's lead author, Sharanjit Paddam.
The surge in insurance costs has contributed to Australia's inflation rates and has raised alarms about the ability of homeowners to adequately protect their properties. High construction costs and elevated climate-related risks have left some individuals either underinsured or without any insurance coverage at all.
The report highlighted that 5% of households with home loans are experiencing extreme financial pressure, with annual insurance premiums averaging A$5,216 ($3,505), more than double the national average of A$2,124. These financially strained households collectively hold approximately A$57 billion in outstanding mortgage loans, accounting for 3% of all home loan assets as of March.
"If their home is damaged by a natural disaster and they either don't have insurance or are underinsured, they could find themselves in a stressful financial situation," Paddam warned.
The implications of widespread underinsurance extend beyond individual households, potentially impacting the stability of financial institutions and the broader economy. "So, this is potentially a problem that's bigger than just insurance. It's also a problem for lenders, regulators and governments," Paddam added.
Regional disparities were also evident in the report, with half of the households in southwestern Queensland, the Northern Rivers region of New South Wales, and regional Western Australia facing premiums that exceed one month's income due to heightened risks of floods and cyclones.
The growing unaffordability of home insurance underscores the urgent need for coordinated efforts to address climate change and its cascading effects on economic and social systems. Without effective interventions, more Australians may find themselves vulnerable to financial hardship in the wake of natural disasters.
(Source:www.uenews.com)
