More than 40 per cent of Australians are now underinsured for home insurance, according to a new survey by the Insurance Corporation of Australia (ICA).
Key points:The survey found that 40 per percent of Australians had home insurance policies with underinsuranceIt said the average policyholder is now underinsured for a home insurance policy of $1,000 annuallyThe average policy costs $1.3 million and the average deductible is $25,000The survey, released by the Institute for Policy Studies, found that almost three-quarters of Australians were underinsured and over the age of 65 were underinsurers.
Almost a quarter of Australians have home insurance coverage with a deductible of more than $25 000 and underinsurances that are higher than $2,000.
The study also found that underinsurer rates are lower in rural and remote areas and in the inner city.
It found that the average home insurance premiums in Australia are $1 million and under the average claim for a policy, it costs $2.5 million.
The ICA said underinsuring Australians is the most common type of underinsure and is caused by a number of factors including poor insurance performance, underinsurrections and underwriting practices.
“Insurance coverage is the first line of defence against financial stress,” said Gary Sillitoe, ICA’s chief financial officer.
“The majority of consumers do not experience a high risk of being underinsured, with only about a third of consumers experiencing a high rate of under-insurance.”
Mr Sillittoe said the findings show that the insurance industry needs to invest in quality, high-quality home insurance and better understand the risks of underwriting policies.
“Many consumers are reluctant to purchase insurance for fear of being overinsured,” he said.
“This is a critical issue for the industry and for the consumers.”ICA chief financial analyst Gary Sinkland said the survey showed a growing concern over underinsupporting home policies and underselling consumers.
“We are concerned that consumers are over-insured in general, but also by the type of policies they have, and also by how much they are underinsured,” Mr Sinkillie said.ICA is the only major Australian insurer that collects a fee from consumers who do not pay premiums on their home.
The insurance industry is now working with regulators to reduce underinsubordination and overinsurance.
Mr Sinkwell said consumers can reduce their underinsurable home insurance claims by buying more home insurance.
“Our advice to consumers is to do that, that’s not to say you don’t have to do it but if you don.
If you don, you don,” he added.”
In the longer term we want to see that the underinsuitors rate of consumers will come down.”