Gemma Acton: Australians are cutting back on insurance as the cost of cover jumps by more than 35 per cent

The anticipatory build-up to an amusing calamity followed by jingly music and a beaming guardian angel from a major insurer swooping in to save the day. The template for insurance advertising hasn’t evolved much in recent decades. But the casual approach to insurance marketing belies the traumatic double blow customers are often left with when they face a serious problem. Whether it’s devastating health news, unanticipated destruction to your home or a prang while cruising around in your beloved set of wheels, the damage from the event itself is frequently compounded by the experience of fighting for insurance payouts. Just ask the Australian Financial Complaints Authority which was inundated with a record 96,987 complaints last year from customers disappointed with their banking, credit, insurance, advice, investments and superannuation providers. A staggering 27,924 of those submissions pertained to general insurers with the most common issue being the time taken to respond to a claim. My sister’s house was badly waterlogged during last year’s Northern Rivers floods. Ultimately, she and her young family were moved to temporary accommodation for six months while her home was made habitable once again. But not before she had waited four months for three separate damage assessments (as the first two were woefully inadequate) and had called her insurer at least weekly to keep the pressure up. She said her claims manager was never available and only when she escalated the issue up to the managerial level was she actually helped — despite having to live while she waited for a response with a one-year-old in a house where black mould had spread throughout, not just in visible spots but also inside of walls. The trauma of retelling her story each week to a new claims representative was also highly distressing. Despite this, she has stuck with the same insurer this year. Partly because when the claims help finally came through, the insurer was attentive and generous. And partly because the pricing turmoil in the insurance markets in the past year made it the only financially feasible option. Consumer advocates at Choice last week launched a campaign to help Australians access simpler, cheaper and fairer insurance to protect against the increased likelihood of extreme weather events. They accused insurers of creating unnecessarily complex products with unaffordable premiums and failing to give homeowners credit for taking steps to safeguard their homes from the elements. The sad reality is that the most vulnerable people, least able to help themselves in the event of a future catastrophe, are the ones who already can’t afford to buy insurance. Many people have crossed into this category since premiums have risen in the past couple of years. It’s not just home insurance that’s shifting from a necessity to a luxury for families. According to the comparison site, Canstar, comprehensive car insurance premiums have soared by 27 per cent nationally since 2021. And the popular car-house hybrid — the caravan — is also feeling the impact. The Caravan Industry Association of Australia says public liability and property insurance policy increases are straining the 1400 caravan parks across the country. Travellers worldwide have become a lot less blasé about purchasing travel insurance after so many were caught off guard during the pandemic. Those few dollars we saved by booking insurance-free holidays through an unknown third-party website with middling reviews proved themselves terrible value for money after we spent weeks battling for refunds with mixed success. But according to the latest survey from Compare Travel Insurance, we’re now scaling back that protection once again. More than a third of Australians won’t buy travel insurance at all due to its increased cost while around a quarter will only consider purchasing the cheapest available option. That’s unsurprising when the cost of cover has jumped by more than 35 per cent since the start of the pandemic. I appreciate that insurers have their own costs to consider and in many instances, they’re now insuring against a notably greater threat of mishaps and pay-outs than in prior years. It’s unreasonable and unfeasible to expect them to shoulder that risk and financial exposure alone. Yet a market that exists to protect against vulnerabilities that is increasingly pricing out society’s most vulnerable is, if not already broken, heading that way, and will further exacerbate the economic inequality that actuarial firm Taylor Fry says is today the worst Australia’s seen since 1950. Technological advances have given both old and new industry participants the ability to move away from the one-size-fits-all premium pricing models to provide both more risk-appropriate and finely tailored coverage to individuals and incentives to customers to indulge in behaviours that reduce their chances of something going wrong and claims being made. Insurance can feel like one of the more tempting costs to cut when we’re reviewing our household budgets and we haven’t lived through a disaster for a while. But before pulling the protection, have a good hunt around for a better deal — it’s an industry where doing a little homework to find a better plan can certainly pay off — and pay out.