Insurance expert Scott Guse predicts a 10% rise in insurance costs this year amid the country’s ongoing struggles with a cost-of-living crisis.
Guse, who is a partner at global professional services network KPMG, said that premiums would increase by 10% based on a yearly review of the insurance industry conducted by KPMG. The prediction was informed by the floods that devastated Queensland and NSW in the last several months – the likes of which he expected Australia would continue to reckon with throughout 2023 – as well as persisting issues left over from last year, such as inflation.
“The expectation of increasing frequency and severity of natural hazards, rising reinsurance costs, increasing inflation, supply chain issues, and labour shortages will continue to put upwards pressure on premiums pricing,” Guse was quoted as saying. “We anticipate that on average, premiums will rise by at least 10% throughout 2023.”
KPMG's survey of the industry already revealed signs of rising insurance costs last year, with household and compulsory third party insurance premiums topping the list in terms of biggest rate increases.
Guse said that the most effective way to improve affordability was building resilience to natural disasters, Sky News reported. He pointed out that about 50% of the increase in premiums this year was solely caused by the impact of severe weather events.
“Improving resilience and thereby reducing the impact of extreme weather events on Australian communities is a key focus for the industry,” Guse said. “This is seen as a must in ensuring insurance remains affordable to all – especially those who need it.”
But affordability could not be addressed by households alone. Guse said that national and local governments had the biggest role to play in preventing a “crisis of affordability”, Sky News reported.
Last year, the Insurance Council of Australia pitched its recommendations to the government. These included a proposal to increase the total Commonwealth fund dedicated to disaster prevention to at least $200 million a year – and just as a starting point for further action.
While the government did invest more in disaster prevention this year – establishing the Disaster Ready Fund – Guse said many of the Insurance Council’s other proposals were not yet implemented.
"The industry is looking for increased government investment – and to work together to develop a more resilient and affordable future for insurance in Australia,” Guse said. “Disaster relief spending is too often an afterthought in Australia, and a more forward-thinking approach to managing catastrophe risk is required."
Guse said that insurers could do their part by rewarding customers who built or redesigned their homes to better, more resilient standards with cheaper premiums, noting that customisation of insurance coverage was an increasingly common practice as customers demanded more flexibility.
“A lot of insurers will now let you adjust excess on a sliding scale,” Guse told Sky News. “You can change your excess from $1,000 to $2,000 and there will be a calculator which shows how this affects the cost of your premium.”
While insurers could help build more disaster-ready households through incentives and flexibility, however, Guse maintained that cooperation with governments should be the priority.
Any thoughts on the story? Let us know in the comments below.