Financial strain on Australian homes highlighted by experts as insurance premiums soar
According to ABC, experts are pointing out a worrying trend in the home and contents insurance market: rates are skyrocketing.
Home and contents insurance premiums are rising sharply, according to Paula Jarzabkowski, a professor of strategic management at the University of Queensland’s Business School, who expressed her concerns about rising costs in an interview with ABC.
“We’re reaching a point where insurance is becoming extremely expensive or inaccessible,” she remarked. “Concretely, 1.24 million, or one out of every eight, Australian households are currently confronted with the reality that purchasing a substantial home insurance policy requires at least four weeks of gross household income.”
Similar worries about auto insurance rates were voiced by Andrew Hall, CEO of the Insurance Council of Australia (ICA).
“It is concerning that a quarter of the vehicles out there do not have proper insurance, or any insurance at all,” he expressed to ABC. “The scarcity of new vehicles to replace those that have been written off, along with the rising costs of parts from overseas or interrupted supply chains, have had an impact on car insurance.” So says the author.
Criteria for determining premiums
Global crises, according to Jarzabkowski, including the war between Israel and Gaza and Russia’s invasion of Ukraine, contributed to the price hikes. She stressed the importance of climate migration in order to potentially save costs.
“This is a really long-term proposition, but we need people to move away from high-cost, high-exposure areas if we’re going to bring the price down,” she told ABC. “It appears that insurance is going up significantly and is here to stay for the foreseeable future,” the expert concludes.
Hall, who is still cautiously optimistic, had doubts over the long-term viability of these inflated expenses.
Increases in interest rates have the effect of increasing the return on insurance premium pools, he added. “Having more money flowing into the system should help bring the increases we’ve seen recently under control,” they said.
Jarzabkowski stressed that more costs are being borne by insurers than ever before, forcing them to pass these costs on to customers.
“Part of it is that we’re having a lot more losses,” she said, adding that Australia is one of the advanced economies most damaged by natural disasters. “In the event of a loss, Australia’s sole insurance policy will cover the costs. That’s how big of a wallet insurance is.”
Uninsured drivers in Australia
A growing number of people may choose not to have health insurance in order to deal with the rising expense of living, and this has Jarzabkowski worried about the future of our nation. According to Mozo, a financial comparison service, two out of five Australians impacted by natural disasters have little choice but to cancel their home insurance due to the increasing cost of living in the country.
Insurance risks are real, and Hall warned against them, even though premiums in Australia are going through the roof.
He told ABC, “We know that affordability has become an issue for many people, and coupled at the same time with increasing interest rates, people are making choices.” However, you must guarantee that you can keep your home and auto insurance policies paid up.
“People ought to read their insurance policies and make sure they’re covered for all the things they might need in the event of an emergency.”