The recent bushfires in Australia have been declared a ‘Catastrophe Event’ by the Insurance Council of Australia (ICA) with most recent figures estimating the number of claims to be in excess of 15,000 with the total cost of claims exceeding $1.34 billion as at 14th January 2020.
Events such as bushfires bring to light to the issue of underinsurance in the property insurance market and how many customers miscalculate the cost of rebuilding their homes when setting their insurance values, particularly after a catastrophic event. It is also important to consider the cost of setting the correct sum insured values when taking out or renewing your property insurance policies, as many customers do not consider the cost to rebuild after a major event where construction costs soar due to demand of labour and materials and can increase over 20% more to rebuild and repair their homes.
In NSW, policyholders are impacted by the Emergency and Fire Services Levy Tax (FSL) on insurance premiums. Many of the taxes in NSW make up over 40% of the cost of premiums which in turn requires some customers to reduce sum insured values to maintain the affordability.
AEI recommends speaking to your insurance broking professional or insurance company to ensure that you have recently reviewed the sums insured on your policies.
Noel Kelly is a Director at AEI Transport Insurance Brokers and has been in the industry for close to 10 years.