Home insurance premiums set to rise after $1.8b in payouts for extreme 2025 weather
"$984 for the whole lot, that being flooding, contents and home insurance," Ms McRae said.
But following repeated natural disasters, her premiums have skyrocketed, making it difficult to justify insuring her NSW Mid North Coast home.
"My view was that my house never flooded. So why would I pay such a high premium when it's never flooded?"
In the years since then, her 120-year-old house has flooded twice — in 2021 and again this year.
Insurance premiums are now in the tens of thousands of dollars a year for Ms McRae, if insurance companies are even willing to cover her.
It is not just people on the flood plain feeling the pain.
Across the board, premiums for all policyholders are expected to continue to rise after a string of natural disasters this year.
The Insurance Council of Australia (ICA) said it was part of a 20-year trend.
"What we are seeing is that, collectively, extreme weather events and their growing frequency and intensity are having an impact on all premiums," ICA's general manager of public affairs, Matthew Jones, said.
"That's why we've seen premiums rise at very significant levels over the past couple of years."
Generally, insurers price their policies with an eye on a multitude of risk factors: where you live, what your house is made of, as well as factoring in the cost of running their business, inflation, and international pressures on the global reinsurance market.
The ICA says the total amount claimed on insurance has been around $1.8 billion for the past financial year — all resulting from three natural disasters in parts of New South Wales and Queensland in the first six months of 2025.
Michael Sherris, emeritus professor in actuarial studies from UNSW, said every time these severe weather events occurred, insurance companies raised their premiums and re-rated their policies to factor in the costs they have had to pay out.
"They have to cover the cost somehow, so they'll spread it across more policyholders and across time," he said.
"These companies are profit-making, they've got shareholders, so they're trying to maximise their profits.
"The fact that they have incurred more and more costs than planned will mean there's more and more pressure for them to put up their premiums to stay solvent and operating."
The ICA found that since extreme weather events, like the 2019–20 Black Summer bushfires and the 2022 floods, premiums across Australia had been rising.
"Insurers have had to play catch-up and replenish their resources so that they can continue to pay claims into the future," Mr Jones said.
"It's the case that people in more flood-prone areas all around Australia, all up and down the east coast, their premiums rose more than other people's because insurers are very aware of the risk of flooding on the east coast of Australia."
Recent analysis from the ICA found that of the estimated 225,000 homes in the highest-flood-risk locations across Australia, only about 23 per cent had flood cover.
Flood cover in these locations costs as much as $30,000 per year.
Last year, a federal House of Representatives inquiry into flood insurance claims following major flooding in 2022 recommended that the government force insurers to be more transparent about their pricing.
The inquiry suggested this could take the form of a traffic light rating system to show the level of risk a property has, or a descriptive analysis about why the premium is rising.
As premiums continued to rise, Mr Sherris was concerned that more people would not renew their insurance or would be underinsured against risk.
"That becomes an issue for the government to think more carefully about the benefits of private insurance and how they can make it work better for these catastrophic events."
To combat rising premiums, the ICA is pushing for the federal government to invest in resilience measures, including a $30 billion flood defence fund.
For Shirley McRae, being priced out of flood insurance coverage meant she faced an uncertain future.
"I'm 74 going on 75. I've just retired. Only six weeks ago, I was sitting on my back verandah thinking I own everything I've got," she said.
"If anything should happen to me now, the children will be fine. My funeral's paid for, and I'll be fine.
"Well, let me tell you. I had no idea that this was going to happen."
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