A parliamentary select committee has recommended insurance companies be forced to disclose insurance premium calculations amid a surge in the cost of household policies, especially for those living in and around areas prone to natural disasters.
The recommendation, one of eight flowing out of an inquiry into the impact of climate change on insurance premiums, comes during a period of rising stress for many homeowners who have received huge price increases in their renewal notices with little explanation.
The Senate committee’s final report details the experience of several households, including a pensioner in the New South Wales town of Mullumbimby who saw her annual home insurance premium almost double to $4,396 in two years after a flood.
Another policyholder from the northern rivers area was quoted a prohibitive $30,000 for flood insurance.
The committee’s chair, Greens senator Mehreen Faruqi, said “families, renters and retirees should not have to pay for absurdly high insurance premiums for a climate crisis they didn’t cause”.
“It is clear from this inquiry that insurance has become the latest major stressor for communities as they face the brunt of climate-driven disasters,” Faruqi said.
“Insurance is increasingly unaffordable and unavailable because insurance companies are either pulling out or hiking premiums and making people’s lives even harder.”
A report by the Actuaries Institute presented to the inquiry found that rising insurance premiums would be magnified because of natural disasters associated with climate change, with those in areas of high flood and cyclone risk – including parts of southern Queensland and the NSW northern rivers region – most affected.
While insurance representative groups told the inquiry that extreme weather events, increasing home values in high-risk areas, high inflation and rising reinsurance premiums were all weighing on prices, households said that premium calculations lacked transparency.
Homeowners raised concerns that measures taken to reduce risks, such as the installation of sprinkler systems and toughened glass in fire-prone areas, were not taken into account in policy prices.
The concerns have been raised at a profitable time for the sector, with shares in Insurance Australia Group, QBE Insurance and Suncorp Group all trading at or near record highs.
The sector has regularly defended its pricing practices, noting that climate change is weighing heavily on prices charged by reinsurers, which take on some of the risk of natural disasters and ultimately pass on costs to policyholders.
The committee’s final report recommends the government:
Create a national disaster risk map and database.
Require insurance companies to clearly explain premium costs to policyholders, including how mitigation measures affect prices.
Order the consumer regulator to regularly monitor premiums.
Work towards abolishing various taxes on general insurance, including stamp duty.
Expand the cyclone reinsurance pool to cover all natural disasters.
Expand the size of the disaster fund.
Review land use planning laws and consider the prohibition of development in high-risk areas.
Explore a levy on coal and gas companies to offset insurance costs and fund disaster mitigation measures.
