Home insurance premiums have already risen significantly on the Sunshine Coast and are expected to rise further due to the impact of Tropical Cyclone Alfred, flooding in North Queensland and the Los Angeles fires.
Some homeowners are being asked to pay double what they were paying two years ago, with one reportedly facing a five-figure bill before finding cheaper cover.
When Anita Lacey moved from a corporate home in Twin Waters to a detached home in Buderim, she was shocked at how much her home insurance cost.
She said her annual premium for a four-bedroom, three-bathroom home was about $4700.
“I didn’t expect it to be that expensive,” she said.
“I did have a house in Mountain Creek a few years ago in a very similar location and I can’t remember what the premium was at the time but it was no more than $5000. It should have been around $3000 or less.”
Sunshine Coast University finance professor Sajid Anwar acknowledged that insurers had a case for increasing premiums before events such as cyclones, floods and fires.
“The first reason is that property values have gone up, the second reason is that the cost of everything – building materials – has gone up, so that’s forced the insurance companies to increase premiums,” he said.
“Like anything that costs more, things change.”
Professor Anwar said after a natural disaster, insurers would reassess the risk and make adjustments, and previously low-risk areas on the Sunshine Coast might not be treated with the same regard.
“Even on the Sunshine Coast, there are areas that didn’t flood before, but now, 20 minutes or half an hour later, there could be flooding,” he said.
Professor Anwar said the Sunshine Coast was not as fully affected by Cyclone Alfred as the Gold Coast, so residents of the Sunshine Coast did not have to worry about rising premiums.
More important to him was the potential areas that could be affected by Alfred, and the “randomness” of the areas affected.
The Insurance Council of Australia said more than 22,400 insurance claims had been made in Queensland and New South Wales due to TC Alfred.
“Given the size of this earthquake – affecting Hervey Bay to Lismore – the Gold Coast was also hit hard, with many people without power and some not being affected at all, that doesn’t mean the same will happen next time. It’s still unknown who will be affected next time,” Professor Anwar said.
He said insurers have to reinsure for major weather events and reinsurance will become more expensive, which will also be reflected in premiums.
The Insurance Council said home insurance premiums were rising across Australia.
“Wherever Australians live – whether they are exposed to extreme weather or not – premiums are under pressure to rise,” a spokesman said.
“This is due to the rising cost of natural disasters, rising home values making it more expensive to repair or replace homes, inflation driving up building repair costs, and the increasing cost of doing business for insurers.”
“When calculating premiums, many factors are taken into account. Insurers consider factors such as underwriting costs, reinsurance costs, operating expenses and environmental factors. Insurance prices risk, and higher premiums generally indicate a higher risk associated with a particular property. ”
The Insurance Council encourages customers to shop around and compare policies to find the best cover for their situation, and recommends simplifying policies or considering higher deductibles to reduce insurance costs.
Professor Anwar said there were steps consumers could take to reduce premiums.
“Buy a property away from the water. Generally speaking, premiums are usually lower the further inland you go, and in some cases, if you have the funds, you can reduce the damage from flooding. But this is not always possible because some houses cannot do this and can only be built on stilts,” he said.
Householders could also consider paying a higher excess in exchange for a reduced premium, he said.
He said the insurance industry, government and construction industry needed to work together in the future to build flood-proof properties through siting, building style and materials to reduce risks.
