Lithium fires and ‘flexi’ water pipes pushing insurance bills higher: Suncorp

One of Australia’s largest insurance providers will raise premiums this financial year by up to 9 per cent as labour shortages, inflation and extreme weather keep pushing up costs for customers.

Suncorp, the giant behind brands including AAMI, GIO and Apia, said on Monday insurance premiums had “moderated” over the past six months, but warned costs associated with home repairs after recent years’ extreme floods and bushfires were putting further pressure on the business.

Suncorp chief executive Steve Johnston has flagged insurance premiums will rise by up to 9 per cent. Credit: Paul Harris

Over the past five years, Suncorp has responded to 700,000 claims costing more than $9 billion, affecting the price of reinsurance and the amount it sets aside as a natural hazard allowance.

Those input costs have added $1 billion to the company’s bottom line, which has been passed on to customers. Higher insurance costs have been the biggest contributor to inflation after heavy flooding across the country in 2022 sent premiums rocketing.

While annual inflation eased to 3.8 per cent in the June quarter, according to the Australian Bureau of Statistics’ most-recent consumer price index figures, insurance costs grew 14 per cent – down from its high of 16.4 per cent in the prior corresponding period.

“We’re seeing some of the inflationary trends start to moderate [in motor insurance], and that’s sort of seeing some of that inflation move down from low double digits to high single digits, and our premiums will adjust accordingly,” chief executive Steve Johnston said.

“In home insurance, it’s slightly more complex because we’re seeing increased severity of ... water damage inside the home, and also more severe fire losses.”

Johnston said house fires were being exacerbated by lithium batteries, adding to the cost of claims, and homes were being flooded because of flexi water pipes installed more than a decade ago bursting and causing significant damage.

In the 2024 financial year, Suncorp responded to 820 natural disasters that cost more than $10 million, including Cyclone Jasper in Queensland in December.

Johnston urged governments to reform planning rules, subsidise customers’ insurance costs in high-risk areas, and reduce the tax charged on insurance premiums.

Suncorp’s full-year net profit rose by 12 per cent to $1.2 billion compared with the previous year, driven by consumer insurance. Its premiums had lifted 13.9 per cent over the year to $14.1 billion, and the company has bumped up its dividend to 78¢ per share, fully franked.

Suncorp Bank, recently acquired by ANZ, posted a profit of $379 million, down 19 per cent on the previous year.

The bank’s net interest margin – a core measure of profitability – rose 5 basis points to 1.85 per cent compared with the first half.

Johnston said proceeds from the $4.1 billion sale of the bank would be returned to shareholders early next year. With Suncorp now solely focused on its insurance business, Johnson said the company could consider other types of insurance cover and alternative reinsurance structures.

Suncorp shares rose 1.5 per cent to $17.41.

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