Tasmanian insurance prices have been pushed up by rising bushfire and flood risks, rebuilding costs and taxes, a new report finds.

The University of Tasmania paper, commissioned by RACT, recommends changing how insurance taxes are calculated, basing them on the value of the property insured rather than the premium level.

This would be fairer, reducing costs for lower-value homes in high-risk areas and slightly increasing costs for higher-value properties, it says.

“This revenue-neutral measure ... would contribute to the policy objective of maintaining or improving home insurance coverage in the face of growing climate risk,” the report says.

The research into price drivers comes after Premier Jeremy Rockliff claimed during the last state election campaign that premiums in Tasmania had been unjustly inflated.

“It feels like every time there are floods and cyclones on the mainland, Tasmanian premiums go up,” Mr Rockliff said a year ago.

Since winning the election, the state government has wound back a promise to establish a state insurer called TasInsure, and is instead partnering with RACT and the private insurance industry to address affordability.

The insured value of homes in the state exceeds $150 billion.

University of Tasmania academics found the state’s premium rises over the past decade have been slightly lower than the 76% jump in most general insurance products in Australia, and insurers have made frequent annual net losses on home insurance despite the line’s premiums growing 45% in real terms. 

Building costs have risen 57% since before the covid pandemic, and bushfires are becoming more severe.  

“Taxes also make up a large portion of insurance premiums,” the paper says. “Despite premium increases over the past decade, insurers have actually made a net loss on home insurance products in four of the past five years.” 

The report finds almost 20,000 homeowners in Tasmania pay more than $1000 for fire and flood cover, and this will rise to nearly 41,000 by 2040.

“Reducing disaster risk – at the community and household level – is the best long-term way to bring down insurance costs.” 

Vegetation management within 50 metres of homes could reduce bushfire exposure in Hobart by 68%, the paper says. 

RACT is investing $1.2 million in the University of Tasmania’s Fire Centre. 

The insurer’s GM of advocacy and government relations Mel Percival says the report reinforces the need to build community resilience to natural disasters. 

“RACT is deeply committed to a partnership approach to address insurance affordability in Tasmania, including taking co-ordinated action to reduce climate risk,” she said.   

See the research here.