The Australian Competition and Consumer Commission’s (ACCC’s) report into insurance in northern Australia has revealed that unaffordable home and contents insurance is affecting the prosperity of communities across the region, though there are actions that could help address this.
The Northern Australia Insurance Inquiry began in 2017, with the final report released at the end of December 2020. According to this report, home, contents and strata insurance premiums in northern Australia are almost double those in the rest of Australia on average, and have increased at a faster rate over the past decade.
The higher cost of these insurance premiums are understood to partially stem from risk-based pricing, with northern Australia being particularly vulnerable to natural disasters such as storms, fire and flooding. However, insurance markets in northern Australia were also found to not be working as effectively as they could, exacerbating affordability concerns. This has led to many homes being uninsured or underinsured, leaving residents at higher risk of ending up in financial crisis if affected by one of these disasters.
ACCC deputy chair, Delia Ricard, said that while the higher risk of extreme weather makes northern Australia understandably more costly for insurers to cover, different insurers can quote vastly different premiums for the same property:
“While many consumers could save by switching, it is harder than it should be for consumers to shop around.”
In the report, the ACCC makes 38 recommendations to help improve outcomes for residents of northern Australia. Some of these include:
- Governments providing subsidies.
- Either abolishing stamp duty on home, contents and strata insurance altogether, or keeping it in place but basing it on the sum insured of a property rather than the premium amount.
- Insurers providing more short-term help for customers struggling to pay their premiums when due, such as by deferring payments, reducing or waiving surcharges for monthly payments, or offering payment plans.
- Better disclosing of surcharges on monthly instalments, so that consumers can better compare the cost difference between paying annually or monthly
- Implementing measures to make pricing more transparent.
- Banning conflicted remuneration for insurance brokers and strata managers.
- Considering the creation of a national home insurance comparison website.
Wherever you live in Australia, it’s important to consider whether your home has the right level of home and contents insurance, and whether there may be more affordable insurance options available. Consider comparing home insurance policies and shopping around for alternatives the next time your renewal date rolls around.