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Home premiums rising fast, warns GlobalData

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Home premiums in Australia are rising at the fastest rate in seven years, pushing insurance out of reach for some, a report from analyst GlobalData warns.

GlobalData says premiums surged 5.9% last year, attributing the rising costs to the increased regularity and severity of extreme weather events in the country. It says 80% of all personal property insurance claims made last year were caused by natural disaster events.

The average home insurance premium is currently priced at $830.60 and is expected to grow to $916.90 by 2026.

GlobalData senior insurance analyst Swarup Kumar Sahoo says the upswing will be felt most by consumers.

“This will have significant impact on home insurance premiums as insurers will pass this to the consumers to recover the losses. Rising insurance costs and increased frequency of natural disasters will leave around 4% of the Australian homes uninsurable by 2030,” Mr Sahoo said.

Northern parts of Australia have been primarily affected by the rising costs, with the region’s risk to natural disasters leading to growth in claims and premiums in the last five years.

In 2019, average premiums for home insurance in Northern Australia rose by 20% compared to 11% in the rest of the country.

The rising prices has experts worried that more Australians will be priced out of insurance premiums and left uninsured.

“Increases in home insurance premiums will lead to underinsurance or no insurance as lower and middle-income groups will look to reduce policy coverage if they are unable to afford high premiums,” Mr Sahoo said.

The Federal Government will bring in a $10 billion reinsurance pool to combat rising prices in July. The Morrison government previously said it will reduce premium costs by up to $2.9 billion over ten years, with Northern Australia policyholders provided with significant reductions.

Mr Sahoo says sustained support will be required to help ease the financial burden for Australians.

“Government initiatives such as creating a reinsurance pool as well as better planning for land use and building sustainable homes will support in controlling the growth in average home insurance prices.”