Aviso Qsure director Melissa Ryan talks to Duncan Hughes from the Australian Financial Review. This article was published in the Australian Financial Review on 13th January 2020 (paywall).
Building and contents insurance premiums in parts of the nation at the highest risk of natural disasters are nearly three times higher than elsewhere, trigging speculation that bushfire zones could increasingly face higher costs for cover.
Insurance premiums in northern Queensland, which has suffered billions of dollars in losses from cyclones, are on average nearly 2.7 times higher, according to Canstar, which monitors insurance premiums.
“We are not suggesting current bushfires will cause premiums to rise 2.7 times,” said a spokesman for Canstar, which compiled the analysis. “But using recent natural disaster events in cyclones in north Queensland, premium increases are looking inevitable.”
Melissa Ryan, a director of Aviso Qsure Insurance Brokers, said Australian households could expect much higher premiums, an increase in cases of uninsurable risks and much tighter underwriting guidelines.
In some parts of northern Queensland some major insurers will no longer cover strata title apartments because of the cyclone risk, Ms Ryan said.
“Many won’t and those that will are very selective,” she said.
Increased risk in northern Queensland has also resulted in fewer insurers.
Ms Ryan believes properties in bushfire areas will face similar pressure.
Tropical Cyclone Debbie, which swept across northern Queensland in 2017, is estimated to have caused damage totalling $2 billion, including loss of exports, tourism, damage to crops and public and private property.
Since then market average annual premiums for home and contents in northern Queensland have risen to about $4221, according to the Canstar analysis.
The premiums are based on home sum insured of $550,000, and $50,000 contents sum insured with an excess of $500.
In other parts of Queensland the annual rate is $1566.
The cheapest annual premiums are South Australia’s $1042, while NSW and Victoria are $1369 and $1161 respectively.
Insurance losses from the fires in NSW, Victoria, South Australia and Queensland so far total about $1 billion. That number that is expected to rise according to the Insurance Council of Australia, the representative body for general insurers.
Bushfire impact downplayed
The ICA said insurance premiums across Australia are “unlikely to be significantly impacted” as a result of the current bushfire situation.
“Insurers have planned for and factored in natural disasters occurring in Australia and are prudentially and logistically prepared,” the spokesman said.
Other insurance brokers, who act as intermediaries between individuals and insurers, said it is too early in the fire season to make predictions about rates.
National Insurance Brokers chief executive Dallas Booth said there had been a “relatively small number” of commercial claims resulting from the bushfires.
“Companies are reviewing their position all the time,” he said.
Heather Peirano, a broker with central Queensland-based Piranah Insurance Brokers, said premiums did not rise in 2015 when Cyclone Marcia caused nearly $600 million damage.
“It is a competitive market. Insurers are not going to raise premiums unless it is a necessity,” Mrs Peirano said.
Last month major insurers warned the federal government that premiums are set to rise due to extreme fires, but that price increases could be limited by reducing bush fuel loads near homes and broader climate change adaptation.Bushfire Crisis – Premiums in high risk areas tipped to soar.