Why insurers may start offering discounts for resilience renovations
Insurance affordability is tightening for many households
Home insurance is becoming increasingly difficult to afford for a growing number of Australians, as natural disasters intensify and building costs rise. One widely used measure of pressure is “insurance affordability stress”, defined as annual home insurance premiums that exceed four weeks of a household’s gross income.
On that measure, the number of households under stress has risen sharply. According to the Actuaries Institute, the share of homes affected increased from 10 per cent in 2022 to 15 per cent in 2024—equivalent to about 1.6 million homes. Over the same period, the number of households spending more than four weeks’ gross income on home insurance premiums per year rose by 50 per cent.
These figures sit alongside broader cost trends. Finity said the average cost of home insurance has increased by about 50 per cent across Australia over the past five years. Industry participants warn that the pressures may not ease on their own, particularly given projections that economic losses from natural disasters could nearly triple from $11.8 billion in 2023–24 to $40.3 billion by 2049–50.
Regulators have also pointed to the risk of more households going without cover. APRA estimates uninsured households could rise from one in seven today to one in four by 2050. The combination of higher premiums, rising risk, and the prospect of more underinsurance and non-insurance is driving calls for a coordinated response.
A coalition proposes linking resilience upgrades to cheaper premiums
In response to rising affordability stress, a disparate group of stakeholders—insurers, actuaries, banks, community legal centres, academics and consumer advocates—has produced a unified action plan intended to tackle the problem from multiple angles.
The plan argues that the solution is not confined to any one sector. Sharanjit Paddam, principal at Finity, which spearheaded the Housing Resilience Action Plan 2030 report, described the challenge as systemic.
“It very much is a systems issue. It can't be solved by insurers on their own, or banks on their own, or even government on its own,” Mr Paddam said.
Built in conjunction with 50 industry experts, the action plan outlines a coordinated approach aimed at ensuring homes are made more resilient to future weather events and are not left at risk of being uninsured. One of its central proposals is to make insurance premiums and lending costs cheaper for homes that have been upgraded to improve their resilience to natural disasters, supported by a national ratings system.
The proposed National Risk and Resilience Rating System
At the centre of the action plan is a proposed scheme called the National Risk and Resilience Rating System (NRRRS). The intention is to connect resilience upgrades directly to cheaper insurance and lending products, creating a clearer pathway between household investment in risk reduction and the costs of insuring and financing a home.
Mr Paddam argued that resilience measures can address the root of the problem in a way insurance alone cannot.
“It's also better than insurance because insurance doesn't stop the flood happening,” he said.
“[Insurance] allows you to recover afterwards, but you're still getting damaged by the flood or the bushfire.”
In practical terms, the ratings approach is designed to make it easier to identify which properties have taken steps to reduce risk—and to enable insurers and lenders to reflect those steps in pricing. The plan’s broader logic is that lowering underlying risk is the most durable way to relieve pressure on premiums over time.
Transparency and consumer confidence remain major concerns
As premiums have risen, so too have concerns about the claims process and about how insurers set prices. Consumer advocates say many households struggle to understand why premiums change or what actions might reduce costs.
Julia Davis, senior policy and communications officer at the Financial Rights Legal Centre, said her organisation receives thousands of calls each year from insurance consumers. She said pricing is often difficult for consumers to interpret and that there are limited requirements to make it more transparent.
“Right now, pricing is just so opaque,” Ms Davis said.
“There are no rules around making it more transparent and we get a lot of calls from people who not only have gotten their premium and it's much higher and they're frustrated, but they've called the insurer and can't get information.”
The action plan includes measures intended to ensure households feel more empowered and protected when learning about home insurance, including access to free assessments. The goal is to help households understand risk, identify practical upgrades, and navigate insurance decisions with more confidence.
Underinsurance, non-insurance, and difficult trade-offs
Affordability stress can lead to households being underinsured or uninsured. Underinsurance means a policy will not fully cover the cost of rebuilding, repairing or replacing a home. In a high-cost building environment, that gap can widen, leaving households exposed even when they believe they are covered.
For some households, the trade-off is more stark: paying higher premiums or going without insurance. Damian Stock, chief executive of Victorian regional human rights and social justice organisation ARC Justice, said some households are increasingly finding they do not have a practical choice.
“What we're seeing increasingly is that people don't really have a practical choice anymore,” he said.
Mr Stock said the consequences can extend beyond individual budgets. In some instances, whole towns—particularly in regional areas—have faced insurance pressure with a range of flow-on effects. He said it could lead to people moving away and raised concerns about the long-term viability of smaller regional towns.
He estimated about half of the home owners he was speaking to in regional Victoria were going without insurance. He also warned of increased disadvantage if people move into areas because properties are worth less, while the insurance burden remains high.
Why lenders are part of the conversation
The proposed approach is not limited to insurance pricing. It also contemplates cheaper lending costs for homes that have been upgraded for resilience, which would potentially support households to fund improvements and spread costs over time.
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 and applied. She pointed to the importance of linking specific actions to changes in risk.
“[For example], if I raise my house or I add extra drains, then my flood risk changes.”
Dr Johnson compared the concept to the take-up of other products, arguing that success depends on the right policy settings, accessible language, and product design that meets community needs.
“If I think about the example of green loans, the reason they have been successful in the last few years supporting the take-up of EV and solar is because the policy settings became right, the language became accessible in communities, and banks created the product,” she said.
The action plan’s emphasis on a national ratings system reflects a similar idea: if households can see how upgrades change risk, and if insurers and lenders can consistently recognise those changes, the market can more easily reward resilience.
Insurers’ view: reducing risk is the sustainable lever
Insurers have signalled support for a focus on resilience, framing it as central to the industry’s ability to keep functioning as disasters become more frequent and severe.
Julie Batch, head of Australian retail insurance at IAG, said insurers welcomed the plan’s focus on “practical, coordinated solutions”. She described resilience as inherent to insurance and argued that reducing risks embedded in existing housing stock is necessary for insurers to continue acting as an effective economic shock absorber when disasters strike.
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 council and its members, and the most effective lever available to address affordability over the long term.
“As an industry that prices risk, we know the only sustainable way to ease pressure on premiums is to reduce the underlying risks themselves,” the statement said.
The council added that without coordinated action across government, industry and communities, affordability pressures will keep growing.
Calls for a National Housing Resilience Accord
The Housing Resilience Action Plan 2030 calls on the federal government to convene a National Housing Resilience Accord within the next six months to begin implementing recommendations. The proposed accord is intended to bring stakeholders together so that changes to ratings, assessments, finance options, and insurance pricing can be developed in a coordinated way rather than in silos.
Proponents argue that coordination matters because households face a connected set of decisions: understanding their risk, paying for upgrades, securing lending if needed, and then seeing those upgrades reflected in insurance premiums. If any link in that chain is missing—such as a lack of trusted assessments or unclear pricing signals—the incentive to invest in resilience may weaken.
Existing programs point to what scaling could look like
While the action plan calls for national coordination, 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 elements aligned with the plan’s direction across the country.
For more than a decade, the RBC has provided a free service to help home owners reduce the risk of natural disasters, which in turn can lower their insurance premiums. Chief executive and founder Kate Cotter said that, given the program’s success, the next step should be national scale.
“We de-risk this strategy for government because so much has already been done and proven,” she said.
Ms Cotter said it was important that households across the country had access to independent, supportive services as well as innovative funding options. She also argued that the work does not need to take decades if existing efforts are scaled and supported.
“We've sort of clearly articulated that we don't have to wait decades to make all of this happen. That all this work is already underway and it just needs scaling and support,” she said.
What the plan is trying to change for households
Across the stakeholders involved—insurers, banks, actuaries and consumer advocates—the action plan reflects a shared diagnosis: premiums are rising because risk and costs are rising, and households need clearer, more practical pathways to reduce risk and be rewarded for doing so.
In broad terms, the plan aims to:
Create a national way to rate risk and resilience so upgrades can be recognised consistently.
Link resilience improvements to cheaper insurance premiums and potentially cheaper lending products.
Improve consumer understanding through measures such as free assessments and more accessible information.
Encourage coordinated action across government, industry and communities, rather than fragmented initiatives.
For households facing affordability stress, the promise of the approach is straightforward: if a home becomes less likely to be damaged by flood, bushfire or other extreme weather, the cost of insuring it should better reflect that reduced risk. For communities, particularly in regional areas where premiums can be highest, the hope is that resilience investment could help slow the cycle of rising premiums and increasing non-insurance.
However, stakeholders also emphasise that the hardest parts of the problem will require careful work with the communities most affected. As Ms Davis put it: “These are really challenging problems and these conversations need to be worked through with the people and the communities that are the most affected.”
The action plan’s call for a national accord is designed to provide a forum for that work—bringing together the institutions that set prices and provide finance, and the households and communities that live with the consequences of rising risk.