As insurance premiums surge, there are warnings that tens of thousands of households could be breaching their mortgage contracts by ditching their home insurance.
A report by the Actuaries Institute found 1.6 million homes around the country were experiencing "extreme home insurance affordability pressures", which means they were paying more than a month's worth of pre-tax household income on insurance.
"It's actually grown by 30 per cent from 1.2 million to 1.6 million households in just one year," actuary Sharanjit Paddam, one of the report's authors, observed with some alarm.
The Actuaries Institute report calculated that 180,000 of those households under extreme home insurance affordability pressures had mortgages, which was about 5 per cent of households with home loans.
Many of the group under extreme pressure are likely to have ditched home insurance, which comes with a huge risk as it places a borrower in breach of their mortgage conditions.
Actuary Sharanjit Paddam is sounding the alarm on the rise in homes with "extreme affordability pressures". (ABC: Dan Irvine)
However, the exact number without insurance is unknown as no one measures it, not even APRA, which regulates both the insurance and banking sectors, along with superannuation.
"That's something we don't collect data on," APRA chair John Lonsdale told a recent ASIC event.
"There's anecdotal data out there but it is, we believe, a very real issue and a growing issue for the country."
It's not just a problem for individual home owners. Uninsured properties are also a major source of risk for the banking sector, according to Mr Paddam, a principal with Finity Consulting.
The report he co-authored estimated banks were owed around $57 billion in outstanding loan balances by those 180,000 borrowers as of March 2024, representing 3 per cent of all home loan assets, which Mr Paddam described as "a very significant number" that should send alarm bells.
"If you compare it to the US, for example, during the GFC, the worst the delinquency rate in the US for home loans got was 9.3 per cent and that caused massive problems through the US market," he warned.
"So us already being at about 3 per cent — and that will get worse over time with climate change — is going to be a stress on the banking system."
Uninsured borrowers already seeking help
Several people around Australia told the ABC their home insurance premium had jumped so high this year they would not be able to afford it.
One woman said her premium went from $3,000 last year to around $30,000 this year without making any claims.
She believed the increase was due to storm activity in her region last year, but such a high premium was not affordable and she said her family would either be hugely underinsured and forgo disaster insurance or have no insurance at all, which would be in breach of their mortgage — so she wanted to stay anonymous.
It is a worrying trend that the Financial Rights Legal Centre is seeing more and more.
Julia Davis said some people were being quoted more than $30,000 for house insurance, which was unaffordable. (ABC: Scott Preston)
"I am absolutely seeing more examples coming through the phone lines of people who simply cannot afford their insurance anymore and have no choice but to be uninsured," senior policy and communications officer Julia Davis told the ABC.
As Ms Davis pointed out, $30,000 was prohibitively expensive for most people to afford and would prompt the majority to forgo the insurance.
"Once insurance becomes out of reach, what choice does somebody have?"
'Wild' price rises for home insurance
While Blair and Ella will be able to pay their insurance bill, they will have to dip into their wedding savings. (ABC: Matt Coble)
And then there are people like Blair Jeffreys and Ella Green, a newly engaged couple in the northern NSW coastal town of Yamba who are busy planning for their wedding next year.
While they will be able to pay their insurance bill, it will come at the cost of their big day, with the couple dipping into their wedding savings to pay the premium.
"Last year, the premium was about $2,069 and then this year, when we got the annual premium, it had gone up to about $3,600 which is more than a 75 per cent increase, which was shocking. I couldn't believe it," Mr Jeffreys said.
Mr Jeffreys said the flood insurance component alone had jumped from $26.11 this year to $757 for next year.
"It's wild, crazy to think someone can put their prices up that much."
Mr Jeffreys said he had never made a home insurance claim nor had there been any natural disasters in his area in recent years, and the insurance company did not provide a reason for the price increase.
For its part, the insurance industry says the price rises are beyond its control
"Wherever you live in Australia at the moment, regardless of whether you're impacted by extreme weather or not, there has been upward pressure on insurance premiums," Kylie Macfarlane from the Insurance Council of Australia said.
"That has been for a number of reasons: those include things like the rising value in Australian homes, which means the asset you're insuring has gone up and therefore the amount of insurance cover you need has also increased; the impact of inflation, particularly on building materials and labour," explained Ms Macfarlane.
"APRA statistics actually show that, over the last four years, insurers have lost over $650 million from home insurance policies, which shows that, ultimately, they're still paying out more to home owners to repair or rebuild their home after an unexpected event than they're actually collecting in insurance premiums."
Blair Jeffreys and Ella Green were shocked to see their home insurance premium rise by 75 per cent. (ABC: Matt Coble)
After working hard as an electrician for decades, Blair Jeffreys feels he is struggling now more than ever
"I feel that the working class isn't the middle class anymore. The poverty line is coming up so much you could be working 40 hours a week plus, and you're still scraping by," he lamented.
"I feel like the Australian dream is getting harder and harder to obtain."
The situation is leaving financial counsellors feeling helpless to offer assistance when people call them with a huge insurance quote.
"Sometimes they call us but, unfortunately, there's not a lot of advice we can give someone who can't afford insurance, except to shop around," said Ms Davis from the Financial Rights Legal Centre.
"There's really no way to challenge an insurer's decision not to cover you or to price you out."
The centre is calling for the government to regulate pricing in the sector.
"We think, at this point, the industry just needs more oversight. We're calling on the government to put in place a permanent national insurance pricing monitor," Ms David added.
"We know the government already regulates pricing of things like health insurance and workers comp, and they oversee things like compulsory third-party car insurance.
"It's time that we start treating home insurance like a utility."