Insurance market failing consumers amidst climate crisis – report

Insurance market failing consumers amidst climate crisis – report

Insurance market failing consumers amidst climate crisis – report | Insurance Business Australia

Insurance News

Insurance market failing consumers amidst climate crisis – report

Customers continue to struggle accessing insurance benefits

Insurance News

Abigail Adriatico

Beneficiaries of the home and contents insurance market have a hard time accessing their insurance when it comes to coverage for extreme weather events, a report commissioned by CHOICE, Climate Council, Financial Counselling Australia, Financial Rights Legal Centre, and the Tenants’ Union of NSW found.

“Two in five respondents to our national survey of home and contents insurance policyholders reported that they had been impacted by extreme weather events in the past five years, but our research found that the insurance market is failing to cover these events fairly and affordably.” said Alan Kirkland, CEO of CHOICE.

“Many people are being forced to pay higher premiums, reduce their cover, or abandon insurance entirely.” he added.

“This report really brings home how difficult accelerating climate change is making insurance unaffordable for so many, particularly those who are most vulnerable.” said Nicki Hutley, leading economist and climate councillor.

The research found five key problems regarding the home and contents insurance market. One of them is complex product design in line with their policies that are quite difficult to compare with other insurers. This can leads to beneficiaries becoming underinsured, according to the report.

Information regarding natural hazard risk was found to often be inaccessible, which also posed a problem because beneficiaries were often unaware regarding the level of risk their households may face.

Another issue flagged was unaffordable premiums, with 87% of the market’s policyholders having seen their premiums rise. This problem was even worse in areas that are prone to disaster as low-income households can no longer afford their insurance and have no choice but to opt out of it entirely.

The last problem, according to the report, was that households in areas that are highly susceptible to disasters need solutions that do not only involve insurance. This problem requires governments to intervene, as a plan is needed in case homes are not safe to live in anymore.

The advocacy groups behind the study called on the government to protect people from the risks that come with the climate crisis the world is currently facing. They suggest the following steps:

Make home and contents insurance simpler, fairer and more affordable by standardising definitions and requiring insurers to proactively warn customers about underinsurance.

Conduct an independent review of the affordability of home insurance – now and into the future.
Trial home insurance subsidies in communities where insurance is unaffordable, particularly for people on low incomes.
Provide funding to help people on low incomes to make their homes more resilient, and amend residential tenancy laws so landlords make rented properties more resilient to climate risks.
Create a database that provides easily understood, publicly available information on current and future climate risks to people’s homes.
Adopt a national approach to planning for relocation of communities at high risk of natural disasters.

“Home and contents insurance needs to be simpler, fairer and more affordable.” said Kirkland.

“We’re calling for coordinated action by governments and the insurance industry to ensure that people are effectively protected against the effects of extreme weather events.” he added.

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