The number of claims from declared extreme weather disasters last financial year surged 73% to more than 156,000 but industry losses remained level at $2.19 billion, the Insurance Council of Australia says in a report today.

The report also shows that while premiums have risen in the past few years, it has not led to a corresponding improvement in industry profitability.

“This most recent catastrophe season saw a significant rise in claim volumes compared with the previous year, indicating a greater number of homes, businesses and people affected by extreme weather events,” the 2023-24 report says.

“While the severity of these events was lower, as reflected by the relatively flat incurred costs and a lower average claim cost, the higher claim volume highlights the widespread impact on communities.”

The report says Cyclone Jasper and three major storms featured in the 2023-24 catastrophe season. They produced 156,802 claims, with an average claim cost of $14,000. 

The Christmas storms produced the largest claim cost of $1.33 billion, followed by Ex-Tropical Cyclone Jasper at $357 million, the NSW/Queensland severe storm in April at $280 million, and the Valentine’s Day storm in Victoria at $215 million.

ICA says the four declared events resulted in flooding, underscoring the threat to communities across the country.

“Floods once again played a significant role in the cost of the catastrophe season ... flood is Australia’s most costly natural peril, and it’s estimated that about 1.2 million properties face some level of flood risk,” the report says.

“Insurance provides financial protection against floods, but it is not a solution to flood risk. Addressing the risk of floods (and other natural hazards) in Australia should be a priority for all governments to keep people out of harm’s way and improve insurance affordability.”

ICA says the industry remains “steadfastly” committed to derisking as the only sustainable way to reduce the pressure on premiums and close the protection gap. Steps should include better planning so no more homes are built in harm’s way, stronger buildings that can better withstand extreme weather and the removal of state taxes on insurance.

“But even if governments were to implement all these policies today, their impact would only be felt over the medium to long term, and the problem is here and now,” the report says. “Any policy intervention to support those Australians most acutely challenged by affordability issues must be effective at addressing the underlying risk problem, not just the premium cost, as well as being targeted effectively to minimise any impacts on other consumers.

“We must continue to support ongoing market viability, including the important and ongoing role that reinsurers play in broader financial system stability.”

The report says insurer profit is necessary to attract capital, through investment and reinsurance, so Australia has a “viable and sustainable” industry.

“Over the past 12 years, the increasing cost of extreme weather has had an upward impact on the amount of premium collected by insurers, [but] insurer profitability has not improved.”

Citing Australian Prudential Regulation Authority data, the report says insurer profits were almost $5 for every $100 in collected premium from 2012 until 2020 and have subsequently dropped to an average of $1.50.

Click here for the report.