Emma’s insurance costs have soared fivefold. It’s part of a wider problem

2 hours ago 1

Insurance premiums have shot up around Australia in the past few years, but for Emma Jordan, the increase has been particularly severe.

After her house was damaged in severe flooding of 2022, the 27-year-old says the annual cost of insuring her house in the Victorian town of Echuca skyrocketed from about $2000 three years ago to about $10,000 today, according to quotes she’s received.

Emma Jordan’s insurance costs have surged roughly five-fold since flooding in 2022.

The cost is so high that Jordan’s biggest asset is currently uninsured, although she plans to reassess in the future and could instead take out partial cover for the house.

“I haven’t taken up any insurance at this point because $10,000 a year on insurance isn’t really feasible,” Jordan says.

Her story highlights the growing risk of underinsurance for people in places where insurance premiums have soared. The surge has sparked debate on what can be done to make insurance more affordable, while insurers’ handling of claims has also been found wanting.

Jordan has experienced both issues: surging premiums and poor claims handling. Her home was damaged by floods that hit Echuca in 2022, with Channel 10’s The Project airing footage of Jordan clad in gumboots while moving sandbags to try to protect the property. When she lodged a claim with her insurer, Honey Insurance (which sells policies issued by IAG-owned RACQ), there was a dispute over how much of the damage was covered.

The Australian Financial Complaints Authority ruled in favour of the insurance company earlier this year, backing its decision that some of the damage was pre-existing, and RACQ ultimately settled for part of Jordan’s claim. Jordan was also entitled to $4000 compensation for the insurer’s poor claims handling, which AFCA said caused unnecessary stress and inconvenience.

The policy on the house recently expired, and RACQ was no longer willing to cover it, so Jordan looked into the cost of insuring her house, including obtaining quotes through a broker. While she can’t afford $10,000 a year, she says there is the option of getting a cheaper policy with less cover – but this would not include cover for flooding.

“I think I’m probably leaning towards just underinsuring because, if I could afford the $10,000, I would just do it for the peace of mind, but it’s not an affordable option,” she says.

Honey Insurance did not comment on Jordan’s case, but said it regularly reviews its portfolios to manage its risk exposure. “At times, changes will be made to where it offers insurance based on the latest information and data available. If this occurs, customers will be advised ahead of their policy renewal to allow them time to make alternative insurance arrangements,” Honey said.

An aerial view of the Echuca flood in 2022.

Jordan says the risk of flooding did come up “at the 11th hour” when she was buying the house in 2022, and says she “should’ve taken it probably a little bit more seriously”. But the flooding that Echuca experienced in 2022 was extreme – the Murray River hit its highest level in the town since 1916. “I don’t think anyone anticipates to see flooding of that kind,” Jordan says.

Jordan’s experience comes as consumer advocates, government and the industry all agree affordability of insurance is a serious problem – especially in areas at higher risk of disasters, particularly flooding.

Consumer Action Law Centre, which supported Jordan, also said the 2022 floods laid bare serious problems in how the industry handles claims. The Australian Securities and Investments Commission (ASIC) said in June that insurers still had work to do in lifting their game, such as improving their oversight of experts, such as builders and repairers.

Comparison website Canstar says the average home and contents premium had jumped by 14 per cent in the past year, based on its analysis of 25,000 new customer quotes. It said NSW had the biggest increase, with an average rise of 18 per cent, followed by 17 per cent in Victoria, South Australia and the Northern Territory, and 16 per cent for Queensland.

Over the longer term, climate change is expected to exacerbate problems with unaffordable insurance, last week’s National Climate Risk Assessment warned.

“As climate impacts worsen, insurance affordability in high-risk regions is very likely to become a growing concern. Households in these regions are likely to face further increases in insurance premiums in the future, decreasing affordability of full insurance and leading to properties at risk of being underinsured,” the assessment said.

The Insurance Council of Australia’s deputy chief executive, Kylie Macfarlane, says some people in areas at higher risk of disaster are deciding to compromise on the level of cover they purchase.

The council says there are about 300,000 properties, mostly in NSW, Victoria and Queensland, which have “severe to extreme” annual risk of flood, but Macfarlane says some people in these areas are opting out of flood cover because they can’t afford it. “They are making decisions not to have it because the price has become very high,” Macfarlane says.

Australia’s insured losses have been $22.5 billion in the last five years, which is a 67 per cent increase on the previous decade, she says, in a sign of how extreme weather is hitting home. The biggest driver of the surge in costs has been flooding.

S&P Global Ratings in February also warned of rising underinsurance “exposing more homeowners and their bank lenders to risks”, adding that there could be an increase in government involvement in locations where insurers were pulling back.

In response, the industry has been campaigning for more public spending on infrastructure such as flood levees, moves to make buildings more resilient to disasters, and improved planning. But it is a slow process that doesn’t relieve the pressure on premiums in the short term.

Jordan, meanwhile, says she realises being underinsured is not ideal, but it is probably her most viable option, as she also hopes for some kind of improvement.

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