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Insurance Costs Soaring – and that’s before the summer’s fires

The South Australian Council of Social Service’s latest Cost of Living Update, released today, highlights the importance of insurance costs in household budgets, points to a long term trend of insurance prices rising at well-above the general inflation rate and raises concerns about the implications of un/under-insurance for vulnerable households.

The report found that:

  • Average South Australian households spend $94 a week (and $107 nationally) on all insurances – double the weekly expenditure on energy or telecommunications
  • House and contents insurance (which is most relevant to disaster resilience) accounts for nearly twice the share of household expenditure for those in the lowest income quintiles by comparison with the highest quintile
  • Renters pay far less per week (because they are only insuring contents, not the house itself), but also have massively greater levels of un-insurance with over 60% of renters not having contents insurance
  • Insurance prices since December 2000 have risen by 97% in Adelaide and 121% nationally, compared to a 59% increase in the national CPI. This data predates this summer’s fires, hailstorms and floods which may further increase insurance prices.

SACOSS Senior Policy Officer and report author, Dr Greg Ogle said,

“Insurance is important because of the size of the expenditure in the household budget, but also because it is a key way that the costs of disasters and extreme weather events are socialised throughout the community.”

“In the context of events like this summer’s disastrous fires, insurance provides a sort of privatised safety net – but one that is only available to those only available to those willing and able to pay the premiums. And with prices rising we are concerned that people on low incomes will opt out of insurance, making them doubly vulnerable to disasters.”

“We have already seen some media reports of massive hikes in insurance premiums in some disaster-effected areas, but our Cost of Living report suggests that the costs of the summer disasters will end up impacting on all households, whether they are insurance policy holders or not, and regardless of where they live.”

“After the Christmas-New Year fire disasters, insurance costs and coverage should be at the forefront of cost of living and disaster resilience considerations – not least because climate science predicts that the extreme weather events are likely to grow more frequent and more challenging.”

The SACOSS report calls for:

  • Insurance companies to develop more simple and low cost insurance options for low income households and government to promote existing low-cost basic insurance products such as those being offered by leading NGO, Good Shephard Microfinance
  • The State Government to review stamp duty on insurance premiums to provide short term, targeted relief for low-income earners
  • A national review to examine how those on low incomes can better access insurance
  • Raising the rate of Newstart and similar income support payments by $95 per week, which (amongst other things) will assist those on the lowest incomes to afford insurance.

The SACOSS Cost of Living Update can be downloaded here

Published Date: 
Monday, 24 February 2020