Consumer problems with home and contents insurance include complex products, unaffordable premiums, inaccessible information on natural hazard risks and a lack of pricing reductions when homes are made more resilient, a report says.  

The report calls for the Federal Government to legislate standard definitions, including terms such as maintenance and wear and tear and says insurers should be required to proactively warn consumers when they suspect policyholders are likely underinsured. 

“Even where people can afford insurance, inconsistent and confusing policy terms often mean that when they go to make a claim, they find they aren’t covered,” it says. “And rising costs of rebuilding mean that many people find they haven’t been adequately insured.”  

The report, Weathering the Storm: Insurance in a changing climate, was commissioned by Choice, Climate Council, Financial Rights Legal Centre, Financial Counselling Australia and the Tenants Union of NSW. 

Choice CEO Alan Kirkland says coordinated action by governments and the insurance industry is required to ensure people are protected against extreme weather event impacts. 

“Home and contents insurance needs to be simpler, fairer and more affordable,” he said. “We also need solutions to the problems that can’t be solved by insurance alone – such as planning for relocation of communities in high-risk areas and funding for people to make their homes more resilient.”  

The report makes 14 key recommendations, which include that the Federal Government should trial subsidies for people on low incomes who can’t afford cover, and that it should allocate funding to assist property owners on low incomes and social housing providers to undertake mitigation measures. 

Insurers should be required to consider relevant property-level mitigation measures in any new or renewing policy, and to demonstrate how those measures have been reasonably reflected in the proposed premium, it says. 

Governments and insurers should also provide advice on mitigation measures that people could take and provide free assessments for people who have undertaken mitigation on their homes.  

Some 67% of policyholders in surveys reported higher-than-expected premium increases, and 39% said their home had been impacted by extreme weather in the past five years. 

Climate Council Economist Tim Nelson says accessible and affordable insurance is critical in a world where extreme weather events are worsening, and mitigation and adaptation is critical. 

“Adaptation in this case looks like developing new approaches for calculating Australians’ insurance premiums and ensuring their policies offer adequate protection,” he said. “This report lays out clear, sensible recommendations for how insurance companies and our government can do that.”