Insurance

Queensland mother’s $16,000 home insurance shock as premiums rise due to climate change

A single mother had to do a double take when she received an email in her inbox to make sure she had read it correctly.

Emma-Lee Lawson, who works as a registered nurse, lives in a newly built home in coastal Queensland in Marlborough with her two children, aged seven and 14.

But the email, from his insurer Allianz, warned that his home insurance needed to be renewed and revealed the company would raise the price to 10 times the previous amount.

Whereas it previously cost the mother $1,699 to insure the family home, she now has to pay $16,418 to cover the property against flooding.

“I was shocked, I felt sick, (I had to) re-read what I saw,” the 34-year-old told news.com.au.

“I just can’t afford to add another $16,000 to my annual budget, especially with the already increased living expenses and changes to the house interest rate. »

Parts of Queensland and New South Wales were badly hit by flooding earlier this year, including the Marlborough area, but the water main did not reach Ms Lawson’s home and she n had to make any insurance claim.

It comes as a new report reveals insurers are increasingly scared off by climate risks, meaning Australians are set to pay significantly more in coming years for home insurance.

Ms Lawson fears she won’t be able to keep a roof over her son and daughter’s heads in the event of a disaster.

“My insurance expired with them (Allianz) and I have a broker helping me find a better deal at the moment but most insurers ask that I not include flood cover to reduce the premium annually,” she said.

In the ‘worst-case scenario’, the mum said she would not insure her home against flooding, but said it would make her ‘uncomfortable’.

News.com.au has contacted Allianz for comment.

A new report from Australian actuarial and consultancy firm Finityreleased earlier this week issued a sobering warning to property owners looking to insure their homes while resonating with the likes of Ms Lawson.

The report titled Home Insurance Affordability and Socio-Economic Equity in a Changing Climatecommissioned by the Actuaries Institute, found that home insurance rates will rise dramatically as climate change increases temperatures and rare natural disasters become more common.

One million households are already considered “vulnerable” as they struggle to pay high premiums relative to their income.

If emission rates continue as they are now to reach 3°C by 2100, this means that by 2050 these vulnerable households will pay an average of $2,523 more to insure their property than they did. currently do.

The director of Finity Consulting and the report’s lead author, Sharanjit Paddam, told news.com.au that although the majority of these vulnerable residences are concentrated in northern New South Wales, the Northern Territory and Queensland, “in every LGA (local government area) there are people in this vulnerable group”.

In a worrying phenomenon, Mr Paddam explained how vulnerable households pay an average of 7.4 weeks of their annual pre-tax income on home insurance, while the Australia-wide average is 1.1 week.

That means those who can least afford it are paying more than seven times the norm to insure their homes.

“For households with annual home insurance premiums over $2,000, half earn less than $65,000,” the report notes.

Households were considered to be under “extreme affordability pressure” if they spent more than four weeks of their income paying for home insurance.

“Our most vulnerable people live in our most vulnerable homes,” Mr Paddam said.

“We think what’s happening here is that low-income people need to find cheaper housing, (which) tends to be on the outskirts of town, in the outer suburbs.

“Many of them would then be prone to bushfire areas.”

Metropolitan areas along the east coast also tend to face higher storm risk, including Sydney, Gold Coast and Brisbane.

Although Sydney, Melbourne and Perth are large cities that “generally have lower natural disaster risks and higher incomes” than elsewhere, the green paper says “many communities in these areas are already struggling with limited household income” and that climate change would “exacerbate” these problems.

Queensland has become the worst state for home insurance costs, with the most vulnerable people struggling to pay funds to big insurance companies.

Nationally, the 10 LGAs with the highest accessibility pressure were all from Queensland.

On average, residents of Aurukun in Far North Queensland have to pay 6.6 weeks of their annual income for insurance, the highest amount in the country.

Next are Pormpuraaw (5.5 weeks), Yarrabah (5.4), Torres Strait Island (5.3), Wujal Wujal (5.2), Kowanyama (4.8), Mornington and Hope Vale ( 4.7), the Northern Peninsula region (4.3) and Lockhart. River (4.1).

Surprisingly, the Sydney suburb of Randwick entered the state’s list of the 10 most vulnerable LGAs, with a score of 2.1 weeks.

The report makes a number of recommendations to put pressure on these vulnerable homeowners, including the abolition of stamp duty and levies on insurance costs.

These additional costs are proportional to the amount of insurance paid, which Paddam said was difficult for low-income people with higher premiums.

“We recommend that these taxes be replaced by more equitable and efficient alternative sources of revenue,” the report adds.

They also called on people in at-risk areas to receive training to mitigate damage to their homes, such as learning how to tie down a roof in the event of a cyclone.

The report also noted that unusual natural disasters are increasingly difficult to predict because historical precedents are no longer a reliable way to predict future catastrophes – something insurers clearly feel about the region where Ms Lawson lives.

“Australian people are generally well aware that the country is susceptible to natural hazards,” the report said.

“However, the level of risk exposure is usually understood with reference to historical events…

“A recent example is the extreme flooding that affected eastern Australia in early 2022. Many affected communities have faced flooding in the past but have been devastated by unprecedented levels of damage. “