When catastrophes such as floods or bushfires occur, policyholders in the region can find their insurance premiums suddenly rising.
According to Insurance Business Australia, the “angry summer” catastrophes of 2019-20 for example led to some individual policyholders complaining about premium rises of nearly 50%!
How insurers determine risk
When insurance providers consider a property to be at a higher risk of floods or other natural disasters, they are likely to charge more to cover that peril.
To determine insurance flood risk for a property, insurers will often use data from the National Flood Information Database and other government flood-mapping sources. They may also consider other factors, such as location, building type, historical flooding and claims history.
If a property is considered to be in a high-risk zone for flooding, flood insurance is likely to cost more. The same applies to insurance for other catastrophes such as bushfires.
Property owners may be able to negotiate a better deal on their insurance costs by taking steps to disaster-proof their property, although this will depend on the particular insurer. Talk to your broker to find out more.