Australia’s Insurance Market Boom: Why Premiums Are Rising and What It Means for You

Australia’s insurance market is growing strongly in 2025, but the same forces driving growth are pushing premiums higher for households and businesses across the country. Premium increases are being shaped by extreme weather losses, higher rebuilding costs, reinsurance pricing, and government taxes and levies – with impacts varying by location, property type, and line of cover.

What’s driving premium rises?

Australia’s recent run of severe bushfires, floods, cyclones, and storms has sharply increased insurers’ claims costs and risk models, flowing through to higher premiums at renewal. The Insurance Council’s 2025 snapshot shows insured extreme weather costs hit $22.5 billion over five years, up 67% from the previous five-year period, while about 4 million properties face some level of flood risk. At the same time, building and repair costs have surged, with home repair/rebuild costs up around 29% since 2019 and materials up roughly 30% since 2022, lifting average claim sizes.

Reinsurance – insurance that insurers buy to cover catastrophe risk – also became pricier after global catastrophe losses, with Australian insurers seeing reinsurance cost increases of up to 30% at 20‑year highs, a factor now embedded in pricing. State taxes and levies further compound premiums, with customers paying an estimated $8.6–$8.9 billion in taxes in FY24/25, often adding 20–40% on top of base premiums depending on the state and cover type.

How big are premium increases?

Across general insurance, premium volumes are projected to rise about 8.6% year-on-year in 2025, reflecting both rate rises and exposure growth. Property lines have seen the steepest increases due to catastrophe losses and rebuild inflation, with multiple analyses noting double-digit average rises and outsized hikes in high‑risk postcodes. Health insurance premiums also increased in 2025, with average rises near 3.7% following government review of proposed increases and continued healthcare cost inflation.

While some market updates suggest partial stabilisation in certain commercial lines after several hardening years, household property and motor remain elevated relative to pre‑2020 levels, and location/risk profile can still drive significant divergence in outcomes.

Why location matters so much

Premiums are increasingly tailored to address local hazard risk and the actual cost to rebuild in that area. Updated flood mapping and bushfire risk models have reclassified many homes, lifting premiums where risk is higher even without a claim history. Consultancy estimates show some homeowners in riskier parts of Sydney paying three times the premiums of lower-risk areas, reflecting granular pricing and reduced risk appetite from some insurers in catastrophe‑exposed postcodes.

The role of reinsurance and global markets

Global catastrophe losses have risen 5–7% annually, raising reinsurance costs globally and in Australia, which ultimately impacts retail premiums. Australian insurers faced some of the toughest reinsurance renewals in decades, and those costs now sit within base pricing for property lines; further volatility in global loss activity can re‑tighten pricing at future renewals.

Are insurers just making more profit?

Headline premium growth masks pressure on underlying profitability from higher claims and capital costs. APRA’s June‑quarter data shows general insurers maintaining solvency and improving service results as peril activity moderated versus prior peaks, but the sector continues to balance reinsurance, inflation, and catastrophe exposure. Industry snapshots indicate insurers collectively paid roughly $49.9 billion in claims in 2024 while total state taxes collected from policyholders exceeded industry profits, highlighting that taxes and claims inflation materially influence customer prices.
What it means for household.

• Budget impact: Expect continued higher premiums at renewal, particularly for home and contents in flood‑, cyclone‑, or bushfire‑exposed regions; motor and landlords’ policies also remain elevated versus pre‑2020 levels.
• Coverage scrutiny: Watch for higher excesses, sub‑limits, and exclusions introduced during the hard market; carefully compare PDS updates at renewal.
• Shopping around: Differences between insurers’ risk models are widening; comparing multiple quotes and adjusting sums insured to accurate rebuild values can reduce overpaying.

What it means for businesses

• Risk‑based pricing: Firms that demonstrate strong risk controls (cyber, property protection, WHS) are finding better terms; surveys show a significant share of organisations cut premiums 5–15% by improving cyber posture alone.
• Broker value: In a market of shifting appetites and exclusions, specialist brokers are helping place difficult risks and navigate reinsurance‑driven constraints.
• Policy optimisation: Review BI indemnity periods, catastrophe sub‑limits, and flood inclusion; align valuations with current rebuild costs to avoid co‑insurance penalties.

Will relief come?

There are early signs of stabilisation in some segments as peril activity normalises and competition returns in pockets, but property lines in hazard‑exposed areas remain pressured. Structural drivers like climate risk, rebuild inflation, and reinsurance cycles mean premiums may not revert to pre‑2020 norms quickly; however, mitigation and resilience can moderate risk over time.

A notable proposal is the Insurance Council’s $30.15 billion Flood Defence Fund over 10 years to harden vulnerable regions, reduce claims severity, and soften premium trajectories in high‑risk areas if implemented at scale. As governments invest in resilience and remove inefficient taxes and levies, pricing pressure could ease for many customers.

Practical ways to reduce premiums now

• Improve property resilience: Roof tie‑downs, ember guards, gutter guards, sump pumps, backflow valves, and defensible space can lower risk and sometimes premiums.
• Update sums insured: Use current rebuild calculators and QS inputs; under‑ or over‑insurance both cost money through penalties or excess premium.
• Increase excess thoughtfully: Higher excess can reduce premiums but ensure liquidity to cover it at claim time.
• Bundle and loyalty: Multi‑policy discounts exist, but still compare because risk models vary widely by insurer.
• Shop renewal early: Start 3–4 weeks ahead to quote with more markets and negotiate terms, especially in catastrophe‑exposed postcodes.
• Maintain claims discipline: Prevent small, frequent claims that can drive loadings; fix minor issues proactively to avoid larger losses.

Key stats at a glance

• 86 million general insurance policies in force in Australia; $49.9 billion paid in claims in 2024.
• Extreme weather insured losses totaled $22.5 billion over five years, up 67% on the prior five‑year period.
• Rebuild and repair costs up ~29% since 2019; building materials up ~30% since 2022.
• Reinsurance costs hit 20‑year highs; Australian programs saw increases up to 30%.
• General insurance premiums projected to rise ~8.6% YoY in 2025; sector revenue and solvency remain stable.
• Health insurance premiums up about 3.7% on average in 2025 amid healthcare cost inflation.

Australia’s insurance market is expanding alongside elevated risks and costs, and that reality is reflected in current premiums. Understanding the drivers – climate‑related losses, rebuild inflation, reinsurance, and taxes – equips households and businesses to take smart steps that can meaningfully reduce costs without sacrificing essential protection.