As of March 2024, 15% of Australian households were classified as experiencing home insurance affordability stress, which occurs when insurance premiums exceed four weeks' worth of income, according to the Actuaries Institute. This equates to 1.61 million households, a significant jump from the 1.24 million households facing similar stress a year earlier—marking a 30% increase.

The surge in insurance costs has contributed to rising inflation in Australia, with indications that some homeowners can no longer afford to protect their properties against climate-related hazards and high construction expenses.

"Regrettably, we anticipate this trend will persist due to the escalating risk of natural disasters linked to climate change, which will continue to drive premiums higher," stated Sharanjit Paddam, the report's lead author.

The report highlights that 5% of Australian households with mortgages are under severe financial pressure, with their insurance premiums averaging A$5,216 (approximately $3,505) per year—more than double the national average of A$2,124. These households, facing the most extreme affordability stress, collectively owe about A$57 billion in outstanding mortgage loans as of March, accounting for 3% of all home loan assets.

"If a natural disaster damages their home and they are either uninsured or underinsured, these homeowners could find themselves in a highly stressful financial predicament," Paddam warned. "This issue extends beyond insurance—it also poses a significant concern for lenders, regulators, and governments."

The report also revealed that due to the heightened risks of floods and cyclones, half of the households in southwestern Queensland, the Northern Rivers region of New South Wales, and regional Western Australia face insurance premiums that exceed one month's income.

(Conversion rate: $1 = 1.4883 Australian dollars) (Reporting by Stella Qiu; Editing by Helen Popper)