The insurance industry will be raising further the cost of insuring a house, in the wake of eight natural catastrophes declared by the Insurance Council of Australia (ICA) since the start of last year.
There has already been a 5% over the March quarter compared to the prior year, reported The Australian citing a a “shop around” survey by Morgan Stanley.
The price increases mark an end to years of downward pressure on insurance premiums, as ultra-low global interest rates sparked a flood of investment into new digital disrupter insurers that brought with them a policy price war.
“This is the first time our home premium index has been in positive territory since December 2013,” Morgan Stanley analyst Daniel Toohey said. “Pricing momentum likely continues following the Sydney hailstorm and Cyclone Debbie.”
Cyclone Debbie, which lashed Australia earlier this month, is expected to cause A$1 billion (US$750 million) of insured damages. Previous to this, the insurance industry had faced a wild weather damage bill of at least A$1.27 billion from a string of natural disasters since the start of last year.
On top of Cyclone Debbie, which has created a damages bill of A$660 million so far from 41,000 claims across Queensland and northern New South Wales, Australia has been pounded by bad weather events over the past 18 months, including several hailstorms, bushfires and floods.
Meanwhile, representatives of the insurance industry appeared yesterday in Sydney at a Senate hearing into the industry to explain the surging costs of home, strata and car insurance over the past decade compared to sluggish wage growth.
CLSA analyst Mr Jan van der Schalk said home and motor are likely to rise by about 5% in areas ¬affected by Cyclone Debbie and 3% elsewhere. Commercial insurance premiums in cyclone-affected regions would probably rise by 15-20%.
Australia’s biggest insurers are urging the government to -revisit plans to ¬increase natural disaster prevention spending, which the Productivity Commission believes will save billions of dollars in post-¬catastrophe clean-ups.
“Lowering the risk also flows through to the price households and businesses pay for their insurance,” Insurance Council Chief Executive Rob Whelan said. Currently, 97% of disaster funding is spent on recovery and only 3% on mitigation.