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Home insurance: Climate change driving up prices in Australia

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House destroyed by bush fire

Some Aussies may have to bear the brunt of rising costs, while others are left relatively unscathed.

The cost of home insurance is rising for everyone. However, some Aussies are facing a much steeper increase than others, just because their home was built in a certain area.

The disparity is largely due to Australia's varied and changing exposure to natural disasters. Some regions are disproportionately exposed to natural disasters, while others remain low risk.

Understandably, residents who live in high risk areas face higher home insurance premiums than their low-risk counterparts. It's more likely their home will sustain damage and insurers have to be certain they can cover the costs.

However, thanks to climate change, the frequency and severity of natural disasters is growing. Those already-expensive premiums are being pushed up even further and there are fears some Aussies won't be able to insure their home.

Pricey Aussie hot spots

A 2019 report from the Australian Competition and Consumer Commission (ACCC) found that home insurance premiums in northern parts of Australia were nearly twice that of other areas. The ACCC identified the region's heightened risk of cyclones and flooding as a key factor.

The same report estimated that 40 percent of homes in north WA are uninsured as well as 26 percent in the NT and 17 per cent in North Queensland.

Now, with many parts of Australia still recovering following a hellish bushfire season, it's likely more regions will be added to the high-risk and high-price list.

So what's the solution?

A 2020 report by UNSW's Practical Justice Initiative suggested Australia adopt a Medicare-style insurance system for fire risk, where everyone bears the same cost of fire risk, regardless of their actual individual risk.

However, this suggestion has been criticised by others, including actuarial and analytics firm Finity, which claimed this approach is problematic.

Finity argues that sharing the cost of fire risk may encourage people to build or buy in high-risk areas, and could even undermine Australia's insurance market. Instead, the firm suggests targeted subsidies to help Aussies facing high home insurance prices.

Taking matters into your own hands

Of course, everyday Aussies aren't entirely powerless to improve their situation. Comparing home insurance online is an effective cost-saving measure and can easily carve thousands of dollars off a home insurance premium.

In fact, research from the NSW government's Emergency Services Levy Insurance Monitor found vast price discrepancies between different insurers quoting cover for identical houses.

In one case, NRMA gave a quote of $6,758 for a 3-bedroom house in Hinton while the second most expensive quote came from CGU for $3,725 and the cheapest quote was given by Westpac, for just $1,040. That's a saving of over $5,000, just by shopping around.

Earlier research from the same initiative estimated that 10 million Australian households were paying a "loyalty tax" on their home insurance, worth a combined total of $3.6 billion.

Often, insurers will offer big discounts to attract new customers, but then raise the price at the next renewal notice. Comparing providers every year is the most effective way to find - and maintain - the best price for your policy.

Could you get a cheaper deal elsewhere?

Comparing home insurance providers every year is the only way to be certain you're not paying too much for your policy.

Name Product Building Cover Contents Cover Fire, Storm & Theft Damage Sum Insured Safeguard Online Discount Cheapest way to pay
Finder AwardBonus
Budget Direct Home & Contents Insurance
Optional
Annually
Our verdict: The most popular insurer on Finder, Budget Direct prioritises low-cost cover and gives you up to 30% off your first year for new combined policies purchased online. This is a big reason it won this year’s Finder Award for value.
Best Rated Brand
Youi Building and Contents Insurance
Annually
Our verdict: Finder’s 2022 Insurer of the Year for Customer Satisfaction and our Top Pick for Fire Damage cover. It’s good if you want a tailored quote over the phone.
Green CompanyBonus
QBE Home & Contents Insurance
Annually
Our verdict: Finder's Top Pick for Floods plus cover for other common claims such as fire and theft). Its discount is better than most – 20% off your first year with a combined policy.
Finder AwardBonus
Honey Home & Contents Insurance
Monthly or Annually
Our verdict: Honey gives you $250 smart sensors to reduce accidents and estimates your rebuild costs for you. Honey was a finalist for the comprehensive category in this year’s Finder Awards.
Bonus
Australia Post Home & Contents Insurance
Annually
Our verdict: Covers common claims such as fire, storms, floods and rain. It’s also very helpful if you need to rebuild following a disaster. It offers a special safeguard of up to 30%.
Bonus
Kogan Home & Contents Insurance
Annually
Our verdict: Good comprehensive cover (issued by QBE). Also, get 16% off on your first year's premium when you purchase a new combined Home & Contents insurance policy online + $10 monthly credit. T&Cs apply.
BonusFinder Award Finalist
Qantas Home and Contents Insurance
Optional
Annually
Our verdict: Earn up to 30,000 Qantas Points with every Qantas Home Insurance policy you take out by 28 May. T&Cs and exclusions apply.
Westpac Home and Contents Insurance
Monthly or Annually
Our verdict: Provided by Allianz, one of the biggest insurers in Australia. Cover for fire, theft, storm, cyclones and more.
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