Insurance stress surges 376,000 amid premium rises

New analysis shows insurance premiums have soared in recent years, with more than 15 per cent of households now under insurance stress.

Global catastrophic weather is driving price rises in Australia, the Actuaries Institute has warned. Picture: Megan Varner/Getty Images

Almost 1.6 million households are now facing insurance stress, with a rising number of families experiencing “extreme” cost pressures as insurers raise premiums in response to inflation and catastrophic weather trends.

New analysis from the Actuaries Institute shows insurance premiums have soared in recent years, with more than 15 per cent of households now under insurance stress.

Stressed households are defined as those who face paying one month’s income to obtain their most basic insurance.

The Actuaries Institute says an extra 376,000 households have fallen into the distressed category over the past year as insurance premiums surged.

It found affordability had worsened for all insured customers in Australia, with a 9 per cent lift in the median premium.

Report author Sharanjit Paddam said many insured customers had seen their premiums rise, and those with already expensive cover faced even steeper price rises.

“Increases in premiums are outpacing wages growth,” he said.

“Unfortunately, we expect this will continue because of the overall increasing risk of natural disasters associated with climate change, which will continue to put upward pressure on ­premiums.”

All major insurers reporting over the past month have revealed spiralling premiums in response to inflation and cost pressures.

Suncorp reported a 13.9 per cent jump in its premiums to $14.1bn, as it unveiled its full year earnings last week.

Rival insurer QBE said its Australia/Pacific customers had seen a 9.9 per cent lift in ­premiums.

Meanwhile, Insurance Australia Group, which runs brands including NRMA, RACV and CGU, told investors last week it had pushed through a 12.8 per cent lift to Australian premiums last year.

IAG also reported it was seeing an increase in distressed ­customers.

Chief executive Nick Hawkins said the insurer had provided financial assistance to 20,000 customers in the past year.

Mr Paddam said reinsurance costs had driven almost two-thirds of the premium increases in the last year, as global re­insurance markets faced tougher conditions.

Insurers purchase reinsurance from global players to cover the cost of their claims in the event of a major catastrophe.

Mr Paddam said inflation was also playing a major role in price rises.

But, Mr Paddam noted home insurance remained a loss-­making product for Australian insurers.

“I don’t think there’s any strong evidence insurers are making significant amounts of profits on home insurance,” he said.

Mr Paddam said governments had to act on land use planning to prevent a further blowout in insurance costs.