Why insurers may start offering discounts for resilience renovations
Insurance affordability stress is rising
Home insurance is becoming harder to afford for many Australians as natural disasters intensify and building costs increase. One commonly used benchmark for “insurance affordability stress” is when annual home insurance premiums exceed four weeks of a household’s gross income. On that measure, the number of households under stress has increased sharply in a short period.
According to the Actuaries Institute, the share of households facing this level of stress rose from 10 per cent of houses in 2022 to 15 per cent in 2024. That equates to about 1.6 million homes. The increase represents a 50 per cent rise in just two years, highlighting how quickly pressure has built across the market.
At the same time, industry estimates suggest the average cost of home insurance has increased by about 50 per cent across Australia over the past five years. While premiums vary widely depending on location and exposure to hazards such as flood or bushfire, the overall trend has heightened concern among households already managing broader cost pressures.
A coordinated plan proposes discounts tied to resilience upgrades
In response to growing affordability stress, a broad alliance of stakeholders has produced a unified action plan aimed at reducing risk and easing pressure on premiums over time. The group includes insurers, actuaries, banks, community legal centres, academics and consumer advocates. The plan’s central idea is to connect the physical resilience of a home—its ability to withstand natural disasters—to the price of insurance and, potentially, the cost of finance.
The proposal is set out in the Housing Resilience Action Plan 2030 report, which was built in conjunction with 50 industry experts and spearheaded by Finity. One of the key recommendations is for the federal government to convene a National Housing Resilience Accord within the next six months to begin implementing the plan’s measures.
Sharanjit Paddam, a principal at Finity, described the challenge as a “systems issue” that cannot be solved by insurers, banks or government acting alone. The plan argues that coordinated action is necessary because the drivers of insurance affordability—risk exposure, building standards, household finances, and the way information is communicated—sit across multiple parts of the economy.
How a national rating system could work
A central feature of the action plan is a proposed National Risk and Resilience Rating System (NRRRS). The concept is to create a national ratings framework that can identify and recognise resilience improvements made to homes, and then link those improvements directly to cheaper insurance premiums and lending products.
The logic is straightforward: if a home is less likely to be damaged in a flood, bushfire or other extreme event because of practical upgrades, the underlying risk is reduced. Stakeholders argue that risk reduction should be reflected in pricing—both for insurance and potentially for finance—rather than leaving households to pay premiums that do not clearly respond to the steps they take to protect their properties.
Mr Paddam also drew a distinction between resilience and insurance itself. Insurance can help a household recover after an event, but it does not prevent the damage occurring. Resilience measures, by contrast, are designed to reduce the likelihood or severity of damage in the first place.
Why transparency and consumer confidence are part of the proposal
Affordability is not the only issue being raised by consumers. Concerns about the claims process and the lack of clarity around pricing have also become more prominent as premiums have risen. Consumer advocates say many households struggle to understand why their premium has increased or what, if anything, they can do to influence it.
Julia Davis, senior policy and communications officer at the Financial Rights Legal Centre, said her organisation receives thousands of calls every year from insurance consumers. She said pricing is “opaque” and that people often report being unable to get meaningful information from insurers when they query premium increases.
The action plan includes measures designed to help households feel more empowered and protected when learning about home insurance and risk reduction. One of the approaches discussed is access to free assessments, which could help households identify practical resilience steps and understand how those steps might affect risk.
The plan’s emphasis on transparency also intersects with another persistent risk in the market: underinsurance. If a home is underinsured, the policy may not fully cover the cost of rebuilding, repairing or replacing the property. While the action plan is focused on affordability and resilience, the broader consumer experience—understanding coverage, pricing and claims—forms part of the context in which any new incentives would need to operate.
Disaster losses are projected to grow, increasing pressure on premiums
Stakeholders behind the plan argue that without action to reduce underlying risk, affordability pressures are likely to intensify. Economic losses from natural disasters are projected to nearly triple from $11.8 billion in 2023–24 to $40.3 billion by 2049–50. Rising losses can flow through to higher premiums, particularly in areas more exposed to extreme weather.
Regulators have also highlighted the potential for the uninsured population to grow. APRA estimates uninsured households could rise from one in seven today to one in four by 2050. That projection underscores why the action plan focuses on keeping homes insurable, not just temporarily reducing premiums.
Regional communities report difficult choices and broader impacts
Affordability stress can have consequences beyond household budgets. In some cases, entire towns—particularly in regional areas—have faced significant insurance pressure. That can affect local stability and contribute to difficult decisions about whether to stay in a community.
Damian Stock, chief executive of Victorian regional human rights and social justice organisation ARC Justice, said some households are forced to choose between paying premium increases and going without insurance. He described the situation as one where people increasingly do not have a practical choice.
Mr Stock said the pressure can contribute to people moving away. He also estimated that about half of the home owners he was speaking to in regional Victoria were going without insurance. He raised concerns about the longer-term viability of some smaller regional towns, and about increased disadvantage if lower property values attract people who then face the same high-risk insurance environment.
Linking resilience to finance: lessons from other lending products
The action plan’s proposals extend beyond insurance. By linking resilience upgrades to lending products, the plan aims to reduce the upfront barrier that can stop households from making improvements. The underlying idea is that resilience measures may require capital, and better financing options could help households act sooner rather than later.
Community First Mutual Bank non-executive director Jacki Johnson said it is not enough for financial institutions to provide information unless it can be understood. She gave examples of how changes to a property—such as raising a house or adding extra drains—could alter flood risk. For households, the challenge is often translating those practical steps into a clear understanding of what changes, and how.
Dr Johnson compared the proposed approach to the success of other products in the market, pointing to “green loans” that have supported the take-up of electric vehicles and solar. In her view, those products gained traction when policy settings improved, language became more accessible in communities, and banks created offerings that matched household needs.
Insurers and industry groups support a focus on reducing underlying risk
Insurers have indicated support for the plan’s emphasis on practical, coordinated solutions. Julie Batch, head of Australian retail insurance at IAG, said in a statement that resilience is inherent to insurance. She said that for insurers to continue acting as an effective economic shock absorber when disasters strike, the growing risks embedded in existing housing stock must be reduced.
An industry spokesperson also framed risk reduction as central to long-term affordability. The view expressed was that, as an industry that prices risk, the only sustainable way to ease pressure on premiums is to reduce underlying risks themselves. The spokesperson added that without coordinated action across government, industry and communities, affordability pressures will keep growing.
Existing programs show how resilience support can be delivered
While the action plan calls for a National Housing Resilience Accord to help implement recommendations, some work is already underway. The Resilient Building Council (RBC), a not-for-profit organisation that has received government and industry funding, has been providing a free service for more than a decade to help home owners reduce natural disaster risk. The organisation’s approach is also linked to the possibility of lowering insurance premiums by reducing exposure.
RBC chief executive and founder Kate Cotter said that given the success of the program, it was time for it to be rolled out at a national level. She argued that substantial work has already been done and proven, which could “de-risk” the strategy for government.
Ms Cotter said it is important that households across the country have access to independent and supportive services, as well as innovative funding options. She also argued that the country does not have to wait decades for change, because elements of the work are already underway and could be scaled with support.
What the proposed approach is trying to achieve
At its core, the action plan attempts to shift the conversation from coping with rising premiums to reducing the drivers of those premiums. By encouraging and recognising resilience upgrades, stakeholders want to lower the damage potential from disasters, keep more homes insurable, and reduce the number of households forced into going without cover.
The plan also seeks to make the system easier to navigate. Consumer advocates have highlighted that many people are frustrated not only by higher premiums but by the difficulty of obtaining clear explanations. Measures such as free assessments and a national rating system are intended to give households practical steps and clearer signals about how risk and pricing connect.
However, the plan’s proponents stress that implementation requires coordination across sectors. The proposed National Housing Resilience Accord is designed to bring together government, industry and communities to move from recommendations to action, particularly in areas facing the greatest pressure.
Key elements raised in the Housing Resilience Action Plan 2030
Recognise that insurance affordability stress is increasing, with premiums exceeding four weeks of gross household income for a growing share of households.
Create a national approach that links resilience upgrades to cheaper insurance premiums and potentially cheaper lending.
Develop a National Risk and Resilience Rating System (NRRRS) to connect upgrades with pricing outcomes.
Improve household support and understanding through measures such as access to free assessments and clearer information.
Convene a National Housing Resilience Accord within six months to coordinate implementation.
The bottom line
With insurance affordability stress affecting a growing number of households and disaster losses projected to rise, stakeholders across insurance, banking and consumer advocacy are pushing for a national framework that rewards resilience. The proposed model is to make homes safer through practical upgrades and then reflect that reduced risk in premiums and finance—an approach designed to keep more households insured and reduce long-term pressure on communities, particularly in high-risk regional areas.