Home insurance pricing in the north is actually fair, ICA

Residents of northern Australia enjoy some of the country’s most picturesque landscapes and tropical weather, but it comes at a price, with home insurance premiums skyrocketing over the past decade.

According to the Australian Government Actuary, the average ‘premium rate’ increased by over 300% between 2007 and 2012 - a steep upward trend that has continued with the Northern Australia Insurance Premiums Taskforce reporting that home insurance premiums had risen by as much as 100% in the four years leading up to 2015.

Predictably, the soaring costs to insure your own home in places like Townsville and Mackay has been met by public outcry with a string of political and community campaigns resulting in the ACCC launching an inquiry into home insurance pricing in northern Australia in October of last year.

But the Insurance Council of Australia (ICA) remains adamant that these big-budget premiums are fairly priced with home insurance providers simply taking into account the higher rates of natural disasters in the region.

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Home insurance providers not at fault

In a formal submission to the ACCC inquiry, the ICA said that, despite affordability issues, home insurance providers were not to blame and were adequately evaluating the risks associated with a region that is far more prone to natural disaster - particularly floods and cyclones - than its southern counterparts.

“The reality… is the region has historically been challenging for insurers and remains a difficult environment in which to operate,” the submission stated.

“It is more expensive to insure in the north, reflective of the risk and claims cost.”

The submission also went on to say that costs to rebuild often snowballed due to the poor levels of infrastructure in the region, which was another factor behind the rising costs of premiums.

Market competition remains

Another claim made to the ACCC by residents of Australia’s northern regions was that insurance providers had been pulling out of the market resulting in less competition and therefore, pricier premiums.

But the ICA submission said that competition remained in the market, whether that be from local or overseas providers.

“The market is generally competitively pricing risk and is well serviced by market participants, with regulatory provisions in place for international competitors to participate where local insurers cannot reasonably do so.”

What factors affect your home insurance premium

With residents of towns like Burke and Cairns anxiously awaiting the results of the ACCC inquiry (to be released in the form of an interim report in November), you might be wondering what goes into formulating the price your own home insurance premium.

From an insurer’s perspective, here is some of what is being weighed up when you plug your details into a site to get a quote:

  • Your claims history: If you’ve made a bunch of claims on previous home insurance policies, the likelihood of you making one again goes up and therefore, so does your premium.
  • Your location: The big issue for those in the Far North. If you live in an area or postcode that is notorious for natural disaster or has a higher claims rate than another area, your premium could be affected.
  • Your home technologies: A relatively new consideration, smart home technologies that allow you to do things like put your house in standby mode and cut electricity reduce your risk of fire and could mean you pay less for your premium.
  • Age of your property: Newer houses might be a little sturdier and therefore less prone to storm damage.
  • Your level of excess: Some insurers allow you to choose a level of excess. If you keep this low, your premium is likely to rise.

The thing about home insurance is that each provider will weigh up these factors differently and therefore the best thing to do is grab a handful of quotes from different insurers.

If you’re in the market for a new policy that will cover you for a range of events, check out Mozo’s home insurance comparison tables.