The traditional home of bricks, mortar and little else is becoming outdated as properties evolve to be sophisticated energy hubs – upending the way they will be insured.

As owners add rooftop solar panels, home batteries, smart meters and electric vehicle chargers, insurers will need to reset sum insured and premium calculations.

Finity senior consultant Vicki Mullen says rapid uptake of renewable energy will add value and complexity, and fundamentally shift the way homes are insured.

“It is a fascinating topic, there’s an awful lot to think about. There are a lot of risks but huge opportunity,” she told insuranceNEWS.com.au.    

“Homes of the future will effectively be not just bricks and mortar, paint and roof tiles; they will be power plants in their own right, so that does potentially change the risk profile.”  

The Australian Energy Market Operator expects 80% of freestanding homes will have rooftop solar by 2050, and more than half of those will have home batteries. Almost all vehicles will be electric.

Finity says this may be an underestimate.

“We imagine that could be slightly underbaking the uptake,” said Ms Mullen, who expects a solar battery “bonanza” under a federal government subsidy of 30% that began on July 1.  

She calls on actuaries and underwriters to start preparing for renewable energy systems that represent a greater proportion of home values.

“We at Finity certainly see this as a major opportunity for insurers to take steps to understand what homeowners might be planning to do in terms of the uptake of integrated energy systems, and start to plan.

“We’ve suggested the industry consider stress testing their current home insurance policies against those kinds of scenarios.”

There is an absence of historical loss information for associated risks.

But scenario analysis suggests that if the 1999 Sydney hailstorm – which today would produce an insured loss of about $9 billion – happened in 2035, more than half the 20,000 homes damaged would have solar panels and batteries.

“You can imagine – if 60% of those homes get an integrated energy system – what that damage bill looks like,” Ms Mullen said.

“So while insurers may not have specific historical claims data, we have got other data points that can be used to feed into an analysis of what could be happening in the future.”

Such a hailstorm would damage panels, disrupt power supplies and leave homeowners unable to charge their cars and other devices.

“The whole neighbourhood is impacted,” Finity said. “Thousands of homes have damaged panels and are without power. Grid electricity is expensive – possibly hundreds of dollars a day. Specialist repairers are in high demand and expensive. The homeowner and family may urgently need temporary accommodation.”

For actuaries, pricing cover will be a challenge, and the interaction of risks must be carefully modelled.

“It comes down to insurers determining what the actual terms and conditions of the cover might be.”

An electric insurance policy would cover both home and vehicle, and other items such as e-bikes.

It could also “provide a hedge” to the retail grid, which could be substantially more expensive than today. This means an economic loss component could be covered by a home insurance policy.  

“If damage to solar panels leaves them out of action for a month, this could lead to a very large electricity bill for the household,” Finity said. “An electric insurance product could cover this additional cost.”

Other considerations are the implications for wear and tear exclusions on solar panels.

Ms Mullen says many questions must be addressed in coming years, and the insurance industry should start thinking about the issue now.  

“There’s no historical data on this, so it’s tricky to model and price. We anticipate ... questions around what these integrated systems might do for the sum insured, but also around whether insurers might want to advise a specific sum insured for the integrated system itself, separate to the actual bricks and mortar.”