Insurance companies should be forced to disclose calculations, inquiry says as Australians face rising premiums

Policy costs surging for many households, committee report finds, especially those facing ‘the brunt of climate-driven disasters’

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 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.

Cover photo: By The Guardian