A similar phenomenon occurred during the early years of the Ukraine War and the Covid pandemic: halts in global supply chains drove a rapid rise in building materials costs and insurers responded with price hikes.<\/p>\n
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Disruptions in global supply chains threaten to increase Aussie building costs, which in turn will put upward pressure on home insurance premiums. Picture: Dan Kitwood\/Getty Images<\/p>\n
Some of these added costs are still being passed on by insurers.<\/p>\n
Analysis by Compare the Market showed the average annual bill for home and contents insurance across the nation\u2019s five biggest capitals rose by $359 over the last year.<\/p>\n
Premiums in Sydney rose the sharpest, adding an average $385 to the typical home and contents premium. It has meant Harbour City policy holders are now required to pay a total of $3200 a year, on average.<\/p>\n
Brisbane premiums rose an average of $311 over the year, with the city recording some of the sharpest rises in building costs over the period. <\/p>\n
These national cost rises predated the war in Iran and Compare the Market economic director David Koch warned more premium price hikes could be in store.<\/p>\n
\u201cInsurers have a lot of thinking to do about the threat of natural disasters and big claim events while the cost of everything is on the rise,\u201d Mr Koch said. <\/p>\n
\u201cAnd with a new inflationary storm brewing off the back of the war in Iran, I think we need to brace for more price rises in the year ahead.\u201d <\/p>\n
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Compare the Market economic director David Koch has told Aussies to brace for more rises in their insurance premiums.<\/p>\n
Modelling from the Housing Industry Association showed Australian home building costs were likely to rise by about 7 per cent this year, in line with high inflation and the experience from the Covid pandemic.<\/p>\n
This would add about $36,000 to the typical cost of building a new house in NSW, which currently costs about $521,000, according to the latest ABS figures.<\/p>\n
Cost rises would be even higher in the ACT, with a 7 per cent rise in building expenses likely to add $40,000 to the price of building. House building cost rises in Victoria and Queensland would be closer to $31,000.<\/p>\n
HIA chief economist Tim Reardon said he anticipated a similar situation to the pandemic, when building costs rose rapidly on account of supply chain disruptions.<\/p>\n
He added that rising interest rates were another factor, which typically flowed through to building costs in about 18 months\u2019 time.<\/p>\n
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House construction costs are expected to rise by about 7 per cent this year.<\/p>\n
Rises in building costs have typically preceded rises in home insurance costs, although the exact dollar amount link is difficult to measure.<\/p>\n
Insurers typically raise their prices when construction expenses rise because of the rising costs of potential payouts they would face if policy holders were to make claims.<\/p>\n
Building insurance is also often calculated based on the likely construction cost of the dwelling, not the property\u2019s market value.<\/p>\n
Mr Koch urged Aussies to defend themselves against more premium hikes in the months ahead by shopping around for cheaper deals. <\/p>\n
\u201cThese price rises we are seeing are scary, but most people still do have the power to save by shopping around,\u201d Mr Koch said. <\/p>\n
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The typical Sydney homeowner is paying about $3200 a year in home and contents insurance.<\/p>\n
\u201cWe consistently see price differences of hundreds, sometimes thousands, of dollars between the cheapest and most expensive quotes for the same cars and houses. <\/p>\n
\u201cIt\u2019s compelling proof of the power of comparison. Now when the cost of everything is on the rise, I don\u2019t think we can afford to let these premium hikes go through to the keeper.\u201d <\/p>\n
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