Recent flood events
The recent flood events experienced across 10s of 1000s of Australians in both Queensland and NSW is unprecedented. Its a great buzz word that unprecedented, but it's apt for what we are experiencing.
The insurance industry was recovering from unprecedented bushfires when the pandemic hit - slowing all industries across the globe and just for fun here in Australian we followed that with unprecedented floods events. We are definitely the over achievers and decided that 3 x '100 year' magnitude flood events in 6 months was the way to go. Totally unheard of before now. The fact that it was spread across 2 states just added to the fun. 'We mastered the saying - go big or go home!!'.
In a small town such as Gympie (the most effected area for our brokerage) Census tell us that in 2021 there were 53,242 residents living in 24,764 dwellings. The February flood effected 3,600 homes and 13,689 businesses in just the town of Gympie. (Those figures do not include all the others towns along the Mary River or storm damaged properties in the same event.) Just this region alone creates a huge demand for builders and supplies. Now multiply this for the many towns across 2 states that have suffered '100year' flood events in the last 6 month.... well you are getting the idea of the damage and the workload for both builders and the cost to insurers. Unprecedented is more than a buzz word!!!
Huge increase in demand for Tradies
The federal Government used Home Builder grants as a means of keeping the building industry going during Covid. This created a spike in new builds and major renovations as people took advantage of the grants. The Housing Industry Association (HIA) figures show 125,000 new houses were due to start construction for 2022, following a year where 149,000 houses had already begun construction (those figures do NOT include home owners who were doing major renovations thanks to additional government grants). That's a whopping 274,000 home beginning construction in a 2 year period. For many builders and tradies it meant they they were booked solid for 2 years.
Add to this
-restrictions due to covid lockdowns;
-tradies who chose not to vaccinate;
-those off sick with covid symptoms that needed to isolate minimum of 7 days;
-and shortage of materials unable to keep up with the demand all pushed the industry to the limit.
-various strains of covid that meant reinfection regardless of vaccination or already having had previous strains of covid
These all added extra strain to industry. Little did we know there was more to come.
The reports identified here were in February 2022. By the end of February early March the floods hit. Major 100 year flood events.
The 100 year floods hit 2 states affecting thousands of houses. This on top of an already over stretched building industry meant that getting a tradie to attend your property after April 2022 was almost mission impossible. There was just too much work and too few tradies to complete it. Those families effected by floods then had to face the impossible task of finding a tradie to do repairs, and an industry ham strung by material shortages. It was just too much. Increased prices inevitable
Any eighth grade economics student will tell you that when demand is higher than supply we see increased prices in the market. We are currently surfing that volatile market and the waves of demand are far exceeding the lifeboats of supply, and I guess we can add covid as an iceberg in this scenario. It has all coalesced to the perfect storm that is not likely to end any time soon. The ripple effect of this storm is starting to be seen across other industries too. Insurance is one such industry.
We are seeing increased premiums across the board. We are seeing underwriters winding back their appetite for domestic portfolios. We are seeing unprecedented slow claim timeframes. Insurers are trying to balance their losses as well as keep up with the massive increases in price in the building industry. Most people are unaware that their rebuild cost have increased 20-60%. Their SUM insured last year will need to be significantly higher this year to ensure they have enough money should they suffer a complete loss.
We have a SUMESURE calculator attached if you want to check your current rebuild on your house.
If you are still unsure if you have enough cover be sure to contact your broker and discuss it with them. Now is the absolutely best time to do a full review of your insurances.