One in eight households are spending a month's wages on home and contents insurance, while a quarter of vehicles don't have adequate car insurance, experts say, as premiums skyrocket following flood and fire disasters.

Key points:

· Professor Paula Jarzabkowski says the rising premiums are causing "extreme insurance stress"

· It's leaving many households either uninsured or under-insured

· Professor Jarzabkowski says the increases are partially because insurers are paying out more claims than ever before

Fran Ross is all too familiar with steep insurance price hikes.

The age pensioner was stunned when the renewal for her home and contents insurance increased by about 400 per cent.

"I would have expected a slight increase, but that was absolutely extreme," she said.

"What it would have meant was that it was almost 20 per cent of my age pension, so I was freaked out by receiving that.

"I felt sick to my stomach, I thought, there's no way I'm going to be able to deal with this."

Ms Ross, who lives in Fitzgibbon in Brisbane's north, has never made a claim and said her home wasn't at risk from natural disaster.

She was told the increase of hundreds of dollars was due to "perils", with no further explanation given.

"I was with them [the insurer] for a long time and it would seem loyalty means nothing," she said.

"There was no consideration for long-existing customers at all."

The ABC has spoken to numerous other insurance consumers with similar stories to Ms Ross, with premium increases ranging from 35 to over 100 per cent.

Sharp premium increases across the country

Paula Jarzabkowski, a professor of strategic management at the University of Queensland's Business School, said home and contents insurance costs were causing serious financial pressure.

"It's getting to the stage of unaffordable or extreme insurance stress," she said.

"In fact, 1.24 million, or one in eight, Australian households is now facing at least four weeks of gross household income to buy a meaningful house insurance premium."

 

Professor Paula Jarzabkowski from UQ's Business School.(ABC News: Alex Brewster)

Insurance Council of Australia chief executive Andrew Hall said car insurance premiums were seeing similar increases.

"We do worry that about one in four vehicles are on the road without adequate insurance, or any insurance," he said.

"Car insurance has been impacted by the costs going up of parts from overseas or disrupted supply chains and a shortage of new vehicles to be able to replace those that have been written off."

Inflated prices here to stay

Professor Jarzabkowski said conflicts like the Israel-Gaza war and Russia's invasion of Ukraine were partly responsible for the hike in premiums.

She added climate migration was essential to a decrease in costs.

"We need people moved away from high-cost, high-exposure areas if we're going to bring the price down, and that's a really long-term proposition," Professor Jarzabkowski said.

"I think we will have to accept insurance is up a lot more and that's here to stay for a while."

 

Insurance Council of Australia chief executive Andrew Hall.(Supplied)

Mr Hall said he was more optimistic prices may fall.

"One of the benefits of rising interest rates is that insurance premium pools are now returning more money," he said.

"We are hopeful that with more capital coming into the system, it will moderate the increases that we have seen over recent times."

What's driven the increase in premiums?

Professor Jarzabkowski explained insurers were having to wear more costs than ever before, which they had to pass on to customers.

"Australia is one of the most disaster-exposed of advanced economies, so part of it is that we're having a lot more losses," she said.

"If you think about insurance as a big wallet, then Australia's got one wallet and that's got to pay for the losses.

"If you've only got a few losses, then that wallet is able to do it easily. But when we get a lot of losses, we have to get more premiums in order to fill the wallet up and pay for more losses."

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She is worried people will have to go uninsured in order to afford the cost of living.

"What you'll see is a growing class of 'uninsureds', or people who might style themselves as self-insured, which might mean that they are trying to put money aside for a rainy day," she said.

Mr Hall warned against the dangers of going without the safety net of insurance.

"We know that affordability has become an issue for many people, and coupled at the same time with increasing interest rates, people are making choices," he said.

"But it's critically important that you ensure you can keep insurance running on your home and your car.

"People should check their insurance policy and know that they've got their insurance covering everything they would need if the worst was to happen."