The maps that show how climate change is driving up the cost of insuring Melbourne homes

Natural disasters and the changing climate are driving up the cost of insurance across Melbourne, with home owners in some suburbs paying three times that of other regions due to bushfire and other risks.

Melbourne home owners have paid an average of 82 per cent more in building insurance premiums compared with five years ago, forking out an average $2214 in January compared with $1316 in January 2021.

The most expensive place to insure a home is the Yarra Ranges, where the annual cost of building insurance leapt to $4481, closely followed by $4448 in Nillumbik, due to the rising risk of bushfires in both municipalities.

That’s almost three times the cost of insuring a home in the City of Whitehorse, where home owners paid an average premium of $1609 a year.

In 2021, Michaela Pascoe and her partner Ulf Johanason were the new owners of Fernglen Forest Retreat, a peaceful B&B set among seven acres of bush featuring significant areas of rainforest.

When the storms hit in June that year, wild winds brought down dozens of massive trees, crushed a studio and took the roof off one of three guest cottages at the property, in Mount Dandenong in Melbourne’s outer east.

Michaela Pascoe surveying the damage to her property in June 2021. Credit: Chris Hopkins

“There were trees just coming down everywhere, it was very wild,” Pascoe said.

“And I think that it gave me an extraordinary fear of the power of nature, which I just probably hadn’t really understood prior to that. It was very, very scary, and definitely made us feel very small.”

Since then, Pascoe and Johanason have left the mountain, and now live in Nillumbik.

Pascoe says that after the damaging storms, weakened trees continue to come down on Mount Dandenong, disrupting power lines and people’s lives.

Massive trees felled by the 2021 storms near Mount Dandenong Primary School, Kalorama.Credit: Joe Armao

She and her partner have had to reimburse guests on multiple occasions when power outages hit.

“People are not properly compensated,” she said. “There’s often businesses that are throwing out produce; people have generators and have to rely on that ... and our [business’s] insurance is far more expensive than it was before the storm.”

Data collected exclusively for this masthead from about 40,000 online quotes for building insurance premiums in Melbourne suburbs, compiled by actuary and insurance consultants Finity, shows Pascoe’s experience is far from isolated.

Finity collected quotes from eight insurers over a six-year period across metropolitan Melbourne, representing the amount that customers would pay if they were taking on a new building insurance policy for a typical risk profile in the local government area.

Flooding along the east coast in early 2022 was among the most costly natural disasters in Australian history.Credit: Justin McManus

Principal Stephen Lau said the most expensive climate-related events in the past 40 to 50 years, from an insurance perspective, were floods, bushfires and the 1999 Sydney hailstorm that caused $8.9 billion in normalised losses (adjusted for inflation, exposure and building stock).

“And that’s then passed back down to consumers ... if there’s higher reinsurance risks, they pass down higher reinsurance costs.”

While Black Saturday and Black Summer had increased insurance premiums, Lau said the most expensive climatic event from a normative loss basis were the 1999 hailstorms.

Rounding out the top three were the 2022-23 floods across south-eastern Australia, and the Black Summer bushfires.

Brotherhood Books in Kensington lost 21,000 books when its warehouse flooded in 2022.Credit: Brotherhood Books

In Melbourne, the municipality with the lowest average insurance premiums was Whitehorse, which had an average insurance premium of $1609 – almost three times lower than the Yarra Ranges Shire.

Lau said the Bayside, Stonnington and Port Phillip local government areas had higher-than-average premiums due largely to the higher cost of housing and larger-than-average property values insured.

Insurance Council of Australia chief executive Andrew Hall called for a 10-year, $30 billion flood defence fund that would be jointly funded by federal and state governments, to develop flood defences, retrofit homes and relocate people where no other mitigation was possible.

“The cost of extreme weather is growing,” he said. “Over the past five years, the annual average insured cost of extreme weather has reached $4.5 billion [nationwide], 64 per cent higher than the previous five-year average.

“This trend is expected to worsen, which is why we must invest in risk reduction, mitigation and adaptation.”

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