Australians Are Cancelling Home Insurance at Record Rates—Here’s Why and What It Means for Disaster Recovery
More than 1 in 5 Australian homeowners have dropped insurance coverage in the past year, according to a new report from the Australian Securities & Investments Commission (ASIC), exposing a growing financial vulnerability as natural disasters intensify. The trend—driven by soaring premiums, climate-related exclusions, and financial strain—threatens to deepen inequality and leave communities more exposed when disasters strike.
With bushfires, floods, and cyclones worsening due to climate change, experts warn the decline in insurance uptake could cripple recovery efforts, particularly in regional areas where insurance is already scarce. Here’s what’s driving the exodus and how it could reshape Australia’s risk landscape.
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### Why Are Australians Dropping Home Insurance?
Three key factors are behind the sharp decline in coverage:
- Skyrocketing premiums: The average annual home insurance premium in Australia rose by 15% in 2023, according to data from Canstar. In high-risk zones—such as parts of Queensland, New South Wales, and Victoria—premiums have surged by as much as 50% over the past two years, pricing out lower-income households.
- Climate-related exclusions: Insurers are increasingly refusing to cover properties in high-risk areas or excluding damage from extreme weather events. A 2023 report by the Insurance Council of Australia (ICA) found that 1 in 3 policies now contain some form of climate-related exclusion, pushing vulnerable homeowners to cancel coverage entirely.
- Financial hardship: With inflation hitting 7.8% in 2023 (the highest in decades), many Australians are prioritizing essentials like groceries and utilities over insurance, which is now seen as a non-discretionary expense. ASIC data shows 32% of cancellations in 2023 were due to affordability concerns.
Regional Australia is hit hardest. In Queensland’s flood-prone areas, where insurers have withdrawn coverage entirely, 40% of homeowners now lack any protection, according to a Queensland Government review.
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### How Is This Affecting Disaster Recovery?
The decline in insurance uptake is creating a double-edged crisis: fewer homeowners can rebuild after disasters, while governments and insurers face higher costs when they do step in.
- Longer recovery times: In 2022, the Natural Disaster Fund paid out AUD 2.1 billion in disaster relief—up from AUD 1.2 billion in 2020. With fewer insured properties, this burden shifts to taxpayers, delaying infrastructure repairs and community support.
- Insurer withdrawals: At least 12 insurers have exited the Australian market since 2020, citing unsustainable claims costs, according to the Australian Prudential Regulation Authority (APRA). This leaves 1.2 million properties without coverage options, per a 2024 Australian Financial Review analysis.
- Widening inequality: Low-income households and renters—who are twice as likely to cancel insurance—are the most affected. A 2023 study by the Australian Institute of Family Studies found that 60% of uninsured households earn less than AUD 60,000 annually, compared to just 20% of insured households.
What happens next? The federal government is considering a new insurance affordability scheme, but experts warn it won’t be enough without broader climate adaptation policies.
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### What Are the Solutions?
Industry leaders and policymakers are debating three potential fixes:
- Government-backed reinsurance pools: The Insurance Council of Australia (ICA) has proposed a AUD 10 billion national reinsurance fund to share risk across insurers, but critics argue it would require taxpayer subsidies.
- Climate resilience incentives: Some states, like New South Wales, are offering discounts for homeowners who install fire-resistant materials, but uptake remains low due to upfront costs.
- Stronger regulation: APRA is pushing insurers to disclose climate risks more transparently, but enforcement has been slow.
Key takeaway: Without urgent action, Australia risks a permanent underinsurance crisis, where entire communities become financially unprotected against the next disaster.
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### FAQ: What You Need to Know
1. Can I still get home insurance if I live in a high-risk area?
It depends. Some insurers offer limited coverage with higher excesses, while others have completely withdrawn from certain regions. The Queensland Government’s Disaster Recovery Fund may provide temporary support, but long-term solutions require policy changes.
2. Will my premiums keep rising?
Likely. The ICA predicts premiums could rise another 10–20% by 2025 as climate risks increase. However, some insurers are offering loyalty discounts or bundling options to offset costs.
3. What should I do if I can’t afford insurance?
Check if you qualify for:
- A Centrelink hardship payment to cover essentials.
- State-based disaster recovery grants (e.g., NSW’s AUD 5,000 Home Repair Grant).
- Community mutual aid programs, such as Bushfire Community Fund.
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