State governments are facing pressure to cut levies and duties on insurance in a bid to make it more affordable.
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Analysis from the Actuaries Institute has underlined the severity of Australia's insurance affordability crisis, with the median home premium experiencing its biggest jump in two decades.
In the 12 months to March, home insurance premiums surged 28 per cent.
Insurers have been pushing up prices for a few reasons - the cost of building work has surged because of supply chain shortages and climate change is fuelling more frequent natural disasters and jacking up reinsurance costs.
Costs have been rising for everyone but covering the risk of floods has become particularly expensive, with low-income households most likely to be living in disaster-prone areas and shouldering the burden.
The Actuaries Institute recommended better flood mapping and moving people out of harm's way.
Overhauling land-use planning and strengthening building codes so all new homes are built to withstand the impacts of climate change would improve the situation.
The Insurance Council says action can be taken by state and territory governments to relieve pressure on prices.
Stamp duty and other state taxes on insurance can add 10 to 40 per cent to the cost of a premium depending on the state or territory.
NSW is the worst state for insurance taxes, with the additional emergency services levy adding around 18 per cent to home insurance premiums, the council says.
"Insurers understand that people are hurting right now as cost of living pressures weigh heavy on monthly budgets, which is why addressing insurance affordability is a critical issue for our industry," council CEO Andrew Hall said.
"State governments in particular can provide immediate relief on insurance costs by reforming their insurance taxes.
"With responsibility for land use planning, state governments must also urgently change our approach to what we build and where we build it so future home owners are not left stranded without insurance cover."
Finity Consulting actuary Sharanjit Paddam said insurance would get less affordable because of climate change and leave more households with no other choice but to go without.
The issue of insurance affordability is on the federal government's radar, with Financial Services Minister Stephen Jones launching an investigation into the matter in the context of devastating floods in 2022.
The Actuaries Institute said an insurance or reinsurance pool for riverine flooding could also be considered.
"If the government was to give consideration to an insurance pool, any future model would need to consider the fact that flood risk is highly localised in Australia among a relatively small number of households with significant exposure," Swiss Re actuary Evelyn Chow said.
The 2022 extreme weather events resulted in almost $7 billion in insured losses.
Northern NSW farmer Peter Lake dealt with major floods in 2009, 2011, 2013, and 2021, but he said nothing could prepare him for the February 2022 event.
"We lost fences and fodder and were forced to sell most of our stock. Even when the waters receded we were flood free but not mud free. We battled mud for months," he said.
Mr Lake, a member of Farmers for Climate Action was quoted $19,000 a year to insure his farm.
"We've had to weigh up not insuring our farm equipment, sheds and fences. We're only insuring the house and a horse float now," he said.
He said urgent action was needed to reduce emissions.
Australian Associated Press
