The Actuaries Institute says “temporary and targeted government intervention” is needed to help manage the issue of insurance affordability, with households in up to 12% of Australian postcode areas facing pressure in meeting annual premiums.

A research paper says any measures to address affordability should take into account the needs of the vulnerable, sending correct economic signals to consumers and identifying what changes in behaviour are needed.

“The overall goal should be to improve the risk profile of the population to maximise insurability of properties and minimise the need, in the longer-term, for ongoing government intervention to promote resilient communities," the paper states.

“We need to future-proof Australia in a cost-effective manner to make affordable insurance available to as many people as possible.”

The report, Property Insurance Affordability: Challenges and Potential Solutions, says there is a compelling case for public policymakers to provide some support for those facing unaffordable premiums.

The transition to address level risk assessment rating has led to some properties seeing “price dislocation”, with moves upwards hitting lower socio economic groups in highest risk areas the hardest.

“Currently, we lack a clear and widely accepted measure of affordability, which is necessary to target relief to those who need it,” the report says.

Efforts to address problems through mitigation and revisions to building codes will take many years and sustained funding, and the current effort is “nowhere near enough” to address the issue rapidly.

The report says the Actuaries Institute strongly supports cost-effective mitigation but is “generally agnostic” towards which other methods should be adopted to address affordability, while suggesting certain guiding principles.

Robust private markets and risk-based pricing support long-term public policy goals, but policymakers must also consider how much economic pain is acceptable for consumers or households to bear, and how much exposure the government can afford to mitigate such pain.

The report also looks at whether losses should be funded before or after events, and in what proportion and to what extent costs should be pushed out and thus borne by future generations.

The paper is available here.