Insurance cover is an expensive, but necessary, part of life. And it becomes more necessary as you get older. But with inflation and climate change driving premiums through the roof, older Aussies are having to make some difficult decisions.
It’s an issue disproportionately affecting older Australians, says Chris Grice, CEO of National Seniors Australia. He joined host John Deeks on the podcast this week to explain what’s happening with insurance premiums and what can be done about it.
He says the current cost of living crisis is a huge driver of insurance stress, and it’s hitting seniors harder than most.
“Older Australians in particular [are feeling the pinch] because they’ve got fixed incomes, insurance is increasing dramatically at the moment and we’re seeing a lot of older folks sort of really grappling with the affordability at this point,” he said.
But why are insurance premiums increasing so dramatically? Is it simply a matter of inflation and the cost of everything rising? No, Mr Grice says, not entirely. Australia’s changing environmental conditions are also playing their role.
“Home insurance premiums are also based on weather events, and now in recent times we saw parts of Australia impacted by cyclones, and storms. Then in other parts of the country, we saw fires,” he says.
“Australia has always suffered from weather events, but we’ve never seen this simultaneous issue where you’ve got flooding in one end of the country and fires down the other.
Another factor is the difficulty in finding tradespeople at the moment, not to mention the materials needed for the repairs.
“Obviously, folk are having to put in claims, and these claims are just so much more substantial than they once were,” Mr Grice says.
“You can’t get materials, you can’t get tradespeople, can’t repair cars, all this sort of stuff. And what it’s doing is pushing the actual price of the insurance claim. And now we’re starting to see this flow on impact in terms of premiums starting to increase.”
John points out that if more claims are being paid due to extreme weather events, then shouldn’t just the people who live in high-risk areas have their premiums hiked? No, says Mr Grice as insurance works by sharing the risk between all members of the fund.
“It’s a pool arrangement,” he says.
“Everyone in some respects subsidises everyone else. It has to work that way, the system doesn’t work.
“However, what is happening now is that insurers, because they’ve got more information at their fingertips, they’re able to understand the riskier areas and I suppose pass on more of an increase to those that are in those more vulnerable spot.”
Isn’t that the fairest way to do it?
“That’s not good in a societal sense because we’ve got to look after everybody,” Mr Grice says.
“But at the same time you’ve got to understand and appreciate that if you do live off the ground or you live in a low risk area and all that sort of stuff, you would expect to pay a little bit less than somebody who’s living down the bottom of a hill next to a river.”
Mr Grice says shopping around for a new insurer is an option, but that premiums are rising right across the industry. Instead, he says the answer may lie in the government winding back some of its insurance-related taxes and charges.
“We’re sort of looking at governments, for example,” he said. Do you really need to be charging GST and stamp duty? Obviously, they are a percentage of the premium that you pay.
“So, if someone’s paying a $10,000 premium, which is not unheard of in terms of home insurance these days, that’s a significant amount of money that someone’s just paying to the government in charges.
“We’re looking at it from a lobbying perspective for the government to look at these sorts of charges because for some people they go, ‘hang on, should I opt out?’
“And that is not a good outcome for anybody if they’re opting out of having their insurance cover.”
Has your insurance gone up recently? Is the increase manageable? Let us know in the comments section below.
Also read: Who is listening to older Australians? National Seniors Australia is
