Financial Services Minister Stephen Jones says there is a growing risk of homeowners abandoning insurance or underinsuring properties as a “perfect storm” pushes up costs.

Mr Jones was speaking at the National Insurance Brokers Association Convention in Adelaide, where he also gave reassurances on commissions and said he is “not convinced” about a flood reinsurance pool.

“I know many in the room here today are aware of the pressures that confront Australians,” he said.

“Insurance costs have risen over 16% in the last year. This is the biggest rise in over 20 years. 

“There is a growing risk that households are just choosing not to insure – or at least underinsure.”

Mr Jones says the major cost drivers represent “a global, perfect storm”, pointing to rising reinsurance rates, increased building material costs and the fact “we are still putting homes in harm’s way”.

“In many instances, planning frameworks allow people to build and rebuild houses in the wrong places,” he said. “There are more people and assets in hazard-prone areas than ever before.”

Mr Jones says global heating will exacerbate the issue.

“The force multiplier here is climate change. It is real. It is here and now. And it is consequential.”

He says the impacts are not evenly distributed, with vulnerable households in northern NSW, north Queensland and the NT most exposed.

“Lower-income households are more likely to be underinsured. And they are more likely to be in harm’s way, which makes it a vicious cycle.

“More and more communities are becoming affected by the long tail of climate change. As losses increase and more regions face higher risks of disaster, the costs of insurance will go up.”

From Insurance News magazine: Our retiring publisher Terry McMullan signs off in style, with a look back at his career covering the industry he loves