Climate Change Makes Australian Home Insurance Unaffordable

In Australia, a surge in claims has caused an average home insurance premium to jump by at least 14%, marking the highest increase in a decade.

In 2022, Australians filed home insurance claims exceeding $4.63 (A$7b), nearly double the prior record. This was mainly due to multiple major floods along the east coast, as reported by the Australia Institute. Climate change is playing a major role in driving up insurance costs in the country. These premiums are rising at a much faster pace than most other goods and services, making home insurance unaffordable for many.

In Australia’s capital cities, insurance costs have outstripped general price hikes. For example, in Brisbane, insurance costs have risen more than five times the Consumer Price Index (CPI). Even in Melbourne, which is relatively less affected by climate change, the increase is nearly three times the CPI. Currently, over 5% of households are spending more than seven weeks’ gross income on home insurance. Stephen Long, a Senior Fellow at the Australia Institute, said, “Rising insurance premiums are the here – and – now cost of climate change.” He further added that the impacts of climate change are non – linear and catastrophic, and traditional linear insurance models for risk calculation and spreading are no longer suitable. Long also pointed out that these insurance cost increases in capital cities are adding substantial pressure on inflation.

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