With the hike in interest rates last year and the predicted increases later this year, many homeowners across Australia are already finding it a challenge to make their mortgage payments and their struggle could soon get even harder. Recent natural disasters in some regions including the flooding in Queensland and Victoria and Cyclone Yasi are already leading to higher insurance premiums for many Australians.
Homeowners in areas hit by the flooding are starting to receive their insurance renewal notices and the increased price tag is not pretty. Price increases for many are going to be up to and in some cases even exceeding 20%.
In just the last two years Australians have already been facing higher insurance premiums with rates rising on average 11% in 2009 and 10% in 2010. This year those in the industry are already predicting on average, rates will rise again by over 8%. As already mentioned areas hit with recent natural disasters can expect their rates to soar well about this figure.
Leader of the general insurance actuarial team at Deloitte Elaine Collins said, ''One would expect that after a couple of severe weather events in a short period of time it's more likely that the overall average increase in household insurance premiums will be more than the 8 per cent predicted [for 2011].''
There are numerous factors that play into what you pay for your insurance premium. These include:
While all of the above listed items do have an impact on your insurance premium, none will affect it as much as recent natural disasters. After a natural disaster, risk to insure in those areas goes up and insurers are quick to pass the cost on to customers.
In looking at the Queensland flooding, insurance premiums in the areas affected are likely to rise higher than other areas. When events like the flooding occur, actuaries tend to look at the historical data and then re evaluate and set prices on how long of a time frame there has been between occurrences. The Queensland area had a similar flooding event just 37 years ago. With such a short time between epic flooding, the risk for the insurance companies is heightened and therefore homeowners will be paying a premium price to be insured.
The insurance industry was quick to come forward and let Australian’s know that their home loan rates would be rising.
Chief executive of QBE Insurance Frank O’Halloran said, ''What you'll see in Australia is a move in property rates - that's for sure - on the back of what's happened.''
''I have no doubt in my mind you'll see significant increases in the costs of re-insurance in Australia,'' he told a market briefing.
Major insurance companies across the country are predicting what their payouts will be. O’Halloran predicts that they payouts for QEB will total around $100 million for Cyclone Yasi damages and another 145 million for damages from the flooding events.
Insurance Group Australia is also predicting payouts in the millions and is expecting their bill will be somewhere between $110 and $130 million for the Queensland area flooding and the Victorian floods will total and additional $25 to $40 million.Back « Interest Rate Cuts to Come Promises Westpac
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