In the frosty foothills of Victoria’s Mt Donna Buang, Australia, Merrlyn Lazarus, a 71-year-old resident of a holiday park, enjoys a life she describes as fit for a queen.
With the beauty of the valley, a vast front and backyard, and a natural swimming pool and river, she sees no reason to live anywhere else. However, the tranquility of her lifestyle and that of over 85,000 people living in Australia’s caravan parks is under threat due to increasing insurance pressures.
Caravan parks across Australia are grappling with soaring insurance premiums and demands from insurers to remove assets deemed risky.
David Pratt, the owner of Warburton Holiday Park and president of the Victorian Caravan Parks Association, has seen his premiums increase by a thousand percent in five years, despite never making a claim. Some parks, with turnovers of about AU$250,000, have been quoted insurance premiums in excess of AU$50,000, making it hard to justify operating.
The Insurance Council of Australia (ICA) attributes the situation to a global “hard market” in insurance, characterized by scarce capital, difficult-to-obtain reinsurance, and low risk appetites.
Since 2019, the caravan park sector has been impacted by this hard insurance market, leading some insurers to reduce their capacity in this sector. Caravan parks in areas of high extreme weather risk or those with guest facilities that may impact underwriting risk are particularly affected.
The Caravan Industry Association of Australia is collecting data to better inform insurers of incidents and risks, while working with the ICA to guide park owners and operators on boosting safety to reduce premiums.
The federal government could help ease market pressures by expanding the reinsurance pool, a funding mechanism that helps insurers underwrite certain kinds of risks, according to Yahoo! News AU.
The Albanese government is committed to making affordable insurance more accessible and has implemented a cyclone reinsurance pool as legislated by the previous Morrison government. The Commonwealth is also offering grants of up to $100,000 for caravan parks to upgrade accommodation, improve accessibility, and reduce environmental footprints.
Despite these efforts, residents like Merrlyn Lazarus are concerned for those less fortunate. If anything happened to caravan parks, a lot of people would be left with nothing. Many have worked all their life for that security, and if it’s taken away from them, it’s wrong.
David Pratt believes that with more certainty for insurance for the sector, caravan park zoning regulations could be expanded beyond parks and retirement villages to ease Australia’s housing crisis.
He estimates the cost per dwelling would be a fraction of a regular residential build and could largely avoid residential planning and subdivision hurdles.
While the insurance challenges facing caravan parks in Australia pose significant threats to their operation and the lifestyle of their residents, they also present opportunities for policy reform and innovation.
With the right support and regulatory adjustments, the caravan park sector could not only survive but also contribute to solving broader societal challenges like the housing crisis.