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As extreme weather becomes more frequent and severe, insurers have responded by raising premiums, withdrawing coverage in high-risk zones, and indexing claims to rising repair costs.[2]
Floods, bushfires, and cyclones have generated record-breaking damage, more than tripling annual insurance claims compared with past decades.[3]
This has left thousands of Australian households, especially in vulnerable regions, struggling with unaffordable or unavailable insurance.[4]
For many, insurance premiums now consume weeks of household income each year, with severe affordability stress and rising protection gaps.[4]
Insurers warn that without major investment in adaptation and resilience, as much as 1 in 25 properties could become uninsurable within years.[5]
The challenge is political, economic, and social: the cost of living and the stability of property markets now hinge on decisive climate policy and smarter risk management.[6]
The stakes for both homeowners and the national economy are escalating, with insurers, government, and communities all seeking solutions.[6]
Rising Premiums and Costs
Climate change has caused insurance premiums to rise far above the rate of inflation in every capital city, putting pressure on household budgets nationwide.[1]
The average home insurance premium climbed by at least 14% between 2022 and 2023, with riskier regions facing increases of 66% since 2020.[1]
Floods, fires, and storms triggered over $7 billion in claims in 2022 alone, almost doubling previous records.[2]
Insurance losses from declared catastrophes now amount to 0.7% of GDP, compared to just 0.2% from 1995-2000.[2]
Insurance Council data shows average annual claims from extreme weather more than doubled over five years, now exceeding $4.5 billion annually.[2]
Rising repair and construction costs further exacerbate premiums for homes, workplaces, and businesses.[2]
Insurer profits have not kept pace with premium growth, meaning rising claims and reinsurance costs are not simply absorbed.[2]
This multi-layered pressure means insurance cost increases vastly outstrip the Consumer Price Index in every major city.[1]
Extreme Weather: The Main Driver
Flooding is now the costliest natural disaster peril facing Australia, accounting for the majority of recent insurance payouts.[3]
Data from the Insurance Council reveals 1.2 million properties face some level of flood risk, with about 230,000 properties enduring a 1-in-20 annual chance of inundation.[3]
Bushfires, cyclones, hailstorms, and severe storms also contribute to rising insurance claims, impacting households across the nation.[3]
The surge in extreme events has forced insurers to refine risk modelling, increasing premiums and reducing affordable coverage in disaster-prone regions.[3]
Major individual events, such as the 2023 Christmas storms and ex-Tropical Cyclone Jasper, generated claims averaging tens of thousands of dollars per property.[3]
The growing frequency and intensity of natural hazards directly reflect global warming trends, with impacts spread nationwide.[3]
Policy experts say worsening extreme weather remains the single greatest threat to insurance affordability and accessibility.[3]
Australia's climate crisis is now a lived experience for millions, not just a future risk.[3]
Affordability Stress and Protection Gap
Nearly one in eight Australian households, about 1.25 million, experience “insurance affordability stress,” paying over four weeks gross income on annual premiums.[4]
One in twenty households faces even greater hardship, spending more than seven weeks of annual income just to insure their homes.[4]
Insurance costs vary sharply by geography, with northern regions and cyclone-exposed areas often paying double the premiums of southern states.[4]
Insurers have started withdrawing coverage entirely from some high-risk flood and bushfire zones, leaving communities exposed.[5]
This protection gap endangers household wealth, mortgage access, and property values, challenging the very foundation of asset security.[5]
Industry data suggest 4% of Australian properties are high-risk and another 10% face abnormal insurance costs due to climate-related claims.[5]
Climate experts say over 80% of homes in some suburbs may soon be uninsurable, with managed retreat and relocation becoming urgent topics.[5]
Without market and policy reform, the protection gap could destabilise housing and financial systems both regionally and nationally.[5]
Where To From Here?
Insurers and regulators emphasise that effective, multi-level policy action is essential to preserving affordable coverage as climate risks escalate.[6]
Solutions highlighted include better land-use planning, stronger building codes, and public investment in resilience—such as improved flood defences and home strengthening programs.[6]
Government intervention, like the $10 billion cyclone pool, has delivered modest impacts but requires ongoing review and calibration.[6]
Insurers advocate transparent consumer information, incentivising private investment in household resilience, and public funding mechanisms for high-risk zones.[6]
Adaptation, mitigation, and managed retreat are politically sensitive, but increasingly necessary as insurance withdrawal accelerates in climate-exposed areas.[6]
Many experts warn that the traditional insurance model can no longer handle the nonlinear impacts of climate change.[6]
The challenge is urgent and ongoing: how to provide fair, affordable, and sustainable protection in an era of climate volatility.[6]
Policy, consumers, and insurers must work together to close the protection gap and build a more resilient future for all Australians.[6]
References
- Australia and NZ face home insurance crisis due to climate, Green Central Banking, 2025
- Extreme weather costs triple in Australia as insurers face rising claims, Insurance Business Magazine, 2025
- Insurers incurred $2.19bn in claims from extreme weather in 2023-24: ICA, Reinsurance News, 2024
- Premium price: The impact of climate change on insurance costs, The Australia Institute, 2024
- Scores of suburbs risk being priced out of cover, climate group warns, Insurance News, 2025
- When Entire Regions Become Uninsurable, Future Proof, 2024