As disasters become more frequent, home insurance must evolve

With recent flooding affecting large parts of Queensland and NSW, timely new research from AHURI highlights the need for Australian home insurance policies to evolve. The report urges home insurance models to move toward making Australian homes more resilient to future disasters.

Policies encouraging ‘build back better’ can reduce impacts of future disasters

The AHURI report, ‘Enhancing housing recovery policy and practice for improving community resilience to future disasters’, explores the housing policies that can improve community preparedness and responses to disasters.

‘We found that a key policy mechanism for reducing disaster risk is the approach commonly known as ‘build back better’’, says lead researcher, Professor David Sanderson from the University of New South Wales. ‘This means that after disasters houses are rebuilt so that they are more resilient to future flood and fire hazards. This might include building homes that are raised above flood levels or use fire-resistant building materials.’

Policies might also include relocating and planning new homes away from very high risk sites.

Insurance can help people rebuild, better

‘The insurance sector has a huge part to play in this. The rebuilding of houses after disasters is mostly funded by insurance. However, additional costs for build back better are not covered by most insurance companies. Developing policies that promote approaches to build back better with incentives, rather than simply replacement, should be a priority,’ says Professor Sanderson.

Government involvement in insurance may be required

Insurance costs are already a burden for many households, with the report noting instances of under-insurance becoming more common in Australia. Home insurance premiums in 2023 increased by 28% on average, but were far greater for the highest-risk properties. These increased by more than 50%. Underinsurance is likely to become increasingly problematic as floods and bushfires intensify and become more frequent in the future.

‘The market-based insurance system is not likely to deliver the sustainable solutions required. Future insurance arrangements need to consider alternative forms that involve both insurance companies and government.’

‘The Australian Government should consider establishing a federal insurance scheme for those who cannot afford to pay high premiums,’ says Professor Sanderson. ‘This will go a long way in helping Australian communities to build back better.’

The research was undertaken for AHURI by researchers from University of New South Wales, Curtin University and RMIT University. It looked at seven Australian disaster case studies covering bushfires, floods and cyclones. This report adds to the insights of two earlier reports released in February 2025.