Worth the risk? Yarra Ranges #1 in bushfire insurance increases

Yarra Ranges homeowners in bushfire-prone areas have experienced the steepest rise in insurance premiums across the country since 2020, according to a recent report.

With the Dandenong Ranges being one of the world’s most fire-exposed urban areas, due to the collection of bushland fuel, steep terrain and limited escape routes, how much pressure is this extra cost putting on local budgets?

Risk hotspots: Released last month, a report from the Climate Council and Emergency Leaders for Climate Action found the greatest threats for Melbourne lie in the northeast and east, particularly the Dandenong Ranges, Warburton Valley and Warrandyte, where dense forests meet residential areas.

• The report also found a number of Australian cities share the same characteristics that made the recent Los Angeles fires so catastrophic, including that up to 90 percent of Australia’s homes in high-risk fire zones (like the Dandenong Ranges) were built before modern bushfire standards existed.

Premiums up, up, up: Insurance providers are always analysing areas to ensure they are appropriately insured due to changing risk, often discovering that areas or properties are under-priced and increasing the premiums.

• If a property is also built using outdated building practices, insurance providers are often insuring the cost of what it would take to rebuild, not the current value of the building.

• A 2024 report from the Actuaries Institute, a body that calculates insurance risks and premiums, found the proportion of "affordability-stressed" households in Australia  – those having to pay insurance premiums of more than four weeks gross household income – rose to 15 percent in the year to March 2024.

• According to Climate Council analysis, the number of high-risk properties in Australia – properties for which insurance is often already unaffordable or unavailable – is expected to grow to 1.3 million by 2050.

Less affordable: Allan Manning, the founder of Insurance claim advisor LMI Group, said higher risk of natural disasters such as bushfires had made it harder to get insurance.

• 🗣️“I've got a friend who owns a restaurant in a bushfire zone, and he's in a catch-22: the council won’t let him cut the trees down but he can't get fire insurance anymore,” Manning told the Eastern Melburnian. “Suddenly, it just becomes uninsurable.”

Too risky? Manning compared Australia’s situation to that seen in Florida and California, where insurers pulled out of the market due to the high risk. He believes similar movements here would cause a “catastrophe” and impact other sectors, like reducing the banks’ ability to offer home loans.

• 🗣️“Without insurance, the world stops,” said Manning. “My biggest fear about Australia is that we're becoming less and less insurable.”

Can we afford to not insure our homes? A 2024 Compare the Market survey found more than one in four Australians did not have home or contents insurance.

• “The problem is the people who can least afford to lose their home are the ones that often don't have insurance,” said Manning.

More heat on the way: A recent study from the World Weather Attribution found Australia’s extreme heat events have become more frequent and more intense due to human-induced climate change.

The National Climate Risk Assessment, released last year, shows the number of extreme heat days in the country will increase from four to 18 days a year if no drastic action is taken.

How much does insurance cost in the Hills? The Eastern Melburnian visited the Youi website to seek a quote for house insurance on a property in Kalorama.

• After receiving a call-back from a team member and answering a few questions, we learnt that Kalorama was not deemed to be too high-risk to be “knocked-out”. The final quote was $521 per month or $6,255 annually.

• Other quotes from various providers ranged from $4,738 to $6,527 annually.

• Based on 2021 Census data, the median weekly household income in Kalorama is about $2,087.