Climate change is making insurance more expensive in Australia, with insured catastrophe losses reaching a record $7 billion in 2022. These costs are adding to inflation, increasing up to five times faster than the consumer price index. Costs are not shared equally, with some premiums in the north of the country double those in the south. Some households spend eight weeks of gross income on insurance per year, effectively working all of January and February, simply to pay their home insurance.

This paper argues the most obvious policy response is to address climate change, both mitigating its magnitude and adapting to its impacts. Beyond this, specific policies to engage with the insurance market may be required but will need to be carefully calibrated and regularly reviewed.

Careful policy responses will be required to ensure that Australians can insure their homes in a way that is equitable, affordable and without unintended consequences.