Home insurance claims are down but building insurance cost is rising

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EXCLUSIVE

HOME insurance policyholders are making fewer claims, contrary to popular belief that natural disasters are increasing the frequency of cover use.

A new report by the consultancy Equity Economics has revealed the number of claims is down 30 per cent compared to 2001.

This seems at odds with the usual story of greater incidences of natural disasters, the report said.

Despite householders making substantially fewer claims, the cost of building insurance has doubled since 2009, Equity Economics said, including a 38 per cent jump in the past four years.

This has pushed many households to the limit of what they can afford.

A new survey of 7000 backers of the Big Insurance Switch has found a third will drop or downgrade their cover if premiums keep on rising at the pace they have been.

Family budgets are at breaking point, said Joel Gibson, campaign director at One Big Switch, which is running the Big Insurance Switch.

Equity Economics concluded that the premium surge was largely due to bigger claim sizes.

Two of the reasons for the reduction in claim frequency are improving building standards and security, according to the actuarial firm Taylor Fry said in research published last year.

Over the long term this will shrink the market for traditional insurance products, Taylor Fry said, so insurers needed to develop new non-traditional products.

Research that rival firm Finity published this year with help from Deutsche Bank said higher excesses were reducing claim numbers, too.

The report also said profit margins in both home and motor cover would be higher than for all other insurance categories. The main risk to producing these results was competition, with challenger brands doubling their market share to seven per cent.

Meanwhile, about 5000 people have signed petitions for the Federal Government to set up an comprehensive, independent comparison site for home and motor cover.

The petition started last week, amid concerns none of the four major insurers policies can be compared in the one place and that major private sector comparison sites size-up products connected to their parent companies.

The Federal Government has already established a home insurance comparison site for north Queensland. It does compare the big providers and reveals some charge double what others do for similar coverage.

The petition for an independent comparison site is part of the Big Insurance Switch campaign, which aims to extract a group discount on home and car cover. The Equity Economics report was commissioned by One Big Switch and based on official data from insurers themselves.

To sign the petition and for more information on the Big Insurance Switch go to this site

There is no obligation to take up any offer. News Corp Australia and One Big Switch will earn a commission from any accepted deals. News Corp is a shareholder of One Big Switch.