Why insurers may start offering discounts for resilience renovations

Insurance affordability is under growing pressure

Home insurance is becoming increasingly difficult to afford for a rising number of Australian households, as natural disasters intensify and building costs increase. A key measure used by industry and consumer groups is “insurance affordability stress”, defined as annual premiums that exceed four weeks of a household’s gross income. When premiums reach that level, the cost can crowd out other essential spending and leave families with limited options.

Recent figures cited by the Actuaries Institute show the scale of the shift. In 2022, insurance stress affected occupants of 10 per cent of houses. By 2024, that had climbed to 15 per cent, representing about 1.6 million homes. Over the same period, the number of households paying more than four weeks’ gross income on home insurance premiums per year rose by 50 per cent in two years.

Beyond the immediate strain on budgets, stakeholders warn that unaffordable insurance can lead to broader social and economic consequences. In some places, particularly regional areas facing higher exposure to natural hazards, insurance pressure can affect whole towns, shaping decisions about where people can afford to live and whether communities remain viable over time.

A unified plan brings insurers, banks and advocates together

In response to these trends, a disparate alliance of stakeholders—insurers, actuaries, banks, community legal centres, academics and consumer advocates—has produced a coordinated action plan aimed at improving affordability and reducing the risk that households become uninsured or underinsured.

The proposal is outlined in the Housing Resilience Action Plan 2030 report, which was built with input from 50 industry experts and spearheaded by Finity. A central idea is that affordability cannot be fixed by any single sector acting alone. As Finity principal Sharanjit Paddam put it, the challenge is a “systems issue” that cannot be solved by insurers, banks or government independently.

The plan calls on the federal government to convene a National Housing Resilience Accord within the next six months to begin implementing recommendations. While the federal government did not respond to questions, the report’s backers argue that coordinated action is necessary if affordability pressures are to be addressed over the long term.

Linking resilience upgrades to cheaper premiums and lending

At the heart of the plan is a proposal to connect resilience renovations directly to the cost of insurance and finance. The stakeholders suggest that homes upgraded to better withstand natural disasters should be eligible for cheaper insurance premiums and potentially lower lending costs, supported by a national ratings framework.

The proposed mechanism is a National Risk and Resilience Rating System (NRRRS). In practical terms, the system would aim to recognise and quantify improvements that reduce a property’s exposure to hazards such as floods or bushfires. The expectation is that, if risk is reduced, pricing should reflect that reduction—making premiums and lending products more affordable for households that invest in resilience.

Supporters frame this as a way to shift focus from paying for damage after an event to reducing the likelihood and severity of damage in the first place. As Mr Paddam argued, insurance helps households recover after floods or bushfires, but it does not prevent the disaster itself. Resilience measures, by contrast, are intended to reduce the embedded risk in existing housing stock.

Why transparency and consumer confidence matter

Affordability is not the only issue raised in the action plan. Many consumers also report frustration with how insurance is priced and how decisions are explained. Consumer advocates say the logic behind premium increases is often unclear, leaving households feeling disempowered when they try to compare policies or challenge changes.

Julia Davis, a senior policy and communications officer at the Financial Rights Legal Centre, said her organisation receives thousands of calls each year from insurance consumers. A recurring theme in those calls is opacity: people receive a significantly higher premium, contact their insurer for an explanation, and still struggle to obtain information that clarifies what is driving the price.

The action plan includes measures intended to help households feel more protected and informed when navigating insurance decisions. Among the ideas is access to free assessments, designed to help people understand their property’s risks and the steps they can take to reduce them. The underlying goal is not only to improve affordability, but also to make insurance interactions more understandable for everyday households.

Rising premiums, rising losses, and the risk of more uninsured homes

Several indicators in the report and stakeholder statements point to why the affordability problem is expected to remain challenging. Finity said the average cost of home insurance has increased by about 50 per cent across Australia over the past five years. Stakeholders also warn that premium rises could escalate further if underlying risks and costs continue to grow.

Economic losses from natural disasters are projected to nearly triple, from $11.8 billion in 2023–24 to $40.3 billion by 2049–50. Alongside that, APRA estimates the share of uninsured households could rise from one in seven today to one in four by 2050. Those projections are frequently cited by advocates of resilience investment as evidence that the status quo is not sustainable for households, insurers or governments.

Stakeholders emphasise that the communities most affected by premium pressure and disaster risk need to be part of the solution. Ms Davis said these are “really challenging problems” and that conversations must be worked through with the people and communities most affected, rather than being designed solely from institutional perspectives.

Regional impacts: when households feel they have no practical choice

While affordability stress is measured nationally, its impacts can be especially acute in regional areas where hazard exposure is higher and where household incomes may not keep pace with premium increases. The action plan and stakeholder commentary highlight that, in some locations, the decision is no longer about choosing between insurers—it is about choosing whether to insure at all.

Damian Stock, chief executive of Victorian regional human rights and social justice organisation ARC Justice, said households can be forced into difficult trade-offs: paying premium increases or going without insurance. He described a situation where people increasingly do not have a practical choice, and warned that the pressure can contribute to people moving away.

Mr Stock estimated that about half of the home owners he was speaking to in regional Victoria were going without insurance. He also raised concerns about the longer-term viability of smaller regional towns, and the risk of increased disadvantage if people move into lower-value properties that may be harder or more expensive to insure.

How a ratings system could change household decisions

A national ratings system is proposed as a bridge between household actions and market pricing. In theory, if resilience upgrades can be assessed consistently, households could see a clearer connection between what they do—such as altering drainage or making structural changes—and what they pay for insurance or finance.

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 a simple example: if a homeowner raises a house or adds extra drains, flood risk changes. For households, the challenge is knowing whether those changes will be recognised in pricing, and whether the cost of upgrades will be offset by lower ongoing premiums.

Dr Johnson compared the concept to the way other financial products have been adopted when the policy settings, language and product design align. She pointed to green loans supporting the take-up of electric vehicles and solar, arguing that success came when communities could access understandable information and banks created products that matched those needs.

Industry response: reducing risk as the “most effective lever”

Insurers have signalled support for the plan’s emphasis on practical and coordinated solutions. Julie Batch, head of Australian retail insurance at IAG, said insurers welcomed the focus on coordinated action and described resilience as inherent to insurance. She argued that for insurers to continue acting as an “effective economic shock absorber” when disasters strike, growing risks embedded in existing housing stock must be reduced.

In a separate statement, a spokesperson for the Insurance Council of Australia said reducing risk for households most exposed to extreme weather is a clear priority for the industry and its members, and that it is the most effective lever available to address affordability over the long term. The council also stressed that, as an industry that prices risk, the only sustainable way to ease pressure on premiums is to reduce the underlying risks themselves.

Both perspectives align with the central logic of the resilience proposal: if risk remains high or grows, premiums are likely to remain under pressure; if risk is reduced through upgrades and better housing resilience, pricing can more plausibly move in a more affordable direction.

Existing programs suggest a pathway to scale

While the action plan calls for a new national accord and a structured ratings system, some work is already underway. The Resilient Building Council (RBC), a not-for-profit organisation that has received government and industry funding, has been implementing parts of the approach across the country.

For more than a decade, the RBC has provided a free service to help homeowners reduce the risk of natural disasters—changes that can, in turn, lower insurance premiums. Chief executive and founder Kate Cotter said that, given the program’s success, it is time for it to be rolled out at a national level.

Ms Cotter argued that the strategy is “de-risked” for government because significant work has already been done and proven. She also emphasised the importance of ensuring households across the country have access to independent and supportive services, as well as innovative funding options. In her view, the groundwork is in place and the next step is scaling and support, rather than waiting decades for change.

What the proposal could mean for homeowners

For homeowners, the plan’s practical promise is straightforward: if you invest in upgrades that reduce your home’s exposure to hazards, you may be better positioned to access cheaper insurance premiums and potentially more favourable lending products. The proposal also aims to make the relationship between risk and price more visible, addressing consumer concerns that premium changes are difficult to understand.

However, stakeholders also acknowledge that implementation would require coordination across multiple systems—insurance pricing, lending practices, assessment standards and government policy settings. The action plan’s call for a National Housing Resilience Accord reflects the belief that the necessary changes span sectors and cannot be delivered through isolated initiatives.

Another issue raised in the broader discussion is 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 focuses heavily on affordability and resilience, it also sits within a wider context in which households are trying to balance cost, coverage and confidence that claims will be handled fairly when disasters occur.

Key elements highlighted in the action plan

• A call for the federal government to convene a National Housing Resilience Accord within six months to begin implementing coordinated reforms.
• A proposed National Risk and Resilience Rating System (NRRRS) to link resilience upgrades with cheaper insurance premiums and potentially lower lending costs.
• Measures to improve consumer understanding and confidence, including access to free assessments and clearer information.
• An emphasis on cross-sector collaboration, reflecting the view that affordability pressures are a “systems issue”.
• Recognition that reducing underlying risk is central to long-term affordability, as argued by both insurers and industry bodies.

The larger challenge: affordability, risk, and coordinated action

The push for resilience-linked discounts comes at a time when more households are crossing the threshold into affordability stress, and when projections suggest uninsured rates could rise substantially in coming decades. Stakeholders argue that the most durable response is to reduce risk where people live, rather than relying solely on post-disaster recovery.

At the same time, consumer advocates are pressing for greater transparency and support, noting that many households struggle to understand why premiums rise and what steps might make a difference. Regional representatives warn that, in some communities, the issue is already reshaping choices about staying, moving, or taking the financial gamble of going without cover.

The action plan’s central proposition—rewarding resilience renovations with cheaper premiums and finance—seeks to align household incentives with the insurance industry’s risk-based pricing model. Whether and how quickly it is implemented will depend on the ability of government, industry and communities to agree on standards, assessments, and funding pathways that are accessible to the people most affected by rising costs.