This report draws on data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey to analyse rates of under and uninsurance in Australia at a time when the severity and frequency of climate disasters is increasing.

It finds that, in 2023, about one in 30 Australian households did not have home building insurance, and one in 20 Australian households was underinsured. This is over 800,000 households and over 2 million people. Over 300,000 Australian households with mortgages were either uninsured or underinsured. As full building insurance is usually a contractual condition for mortgages, these households risk substantial losses if disaster hits or if the bank finds that they have breached their mortgage conditions.

The analysis in this paper suggests that banks in Australia hold over $100 billion in mortgages on inadequately insured properties, and likely much more. As mortgage lending dominates the Australian financial system, with two-thirds of banks’ total domestic lending dedicated to housing loans, this poses significant risks to the broader Australian economy.

Climate disasters are impacting an increasing number of people and causing an increasing amount of damage. This is pushing insurance prices upwards. In 2022, nearly one in 20 Australians saw their home damaged or destroyed because of a weather-related disaster. In Australia, every year since 2013 has seen more insured losses than the total combined losses from 2000 to 2004. Globally, even accounting for inflation, insured losses for the first five years of the 2020s were USD$722 billion globally, almost double the losses for the entire 1990s (USD$367 billion).

Unfortunately, the Australian Government is pouring fuel on the fire. Through the huge subsidies given to fossil fuels, and by allowing the production of fossil fuels to expand, current policies are enabling further climate pollution. By instead taxing fossil fuel companies to pay for the costs of the climate crisis, the Commonwealth could create a National Climate Disaster Fund. This fund could be used to help pay for the costs of natural disaster response and recovery, and invested in mitigating the extent of climate change and preparing for its already locked-in impacts. This would help keep Australians safe and help bring down insurance prices.