Carefully targeted government subsidies have been floated as a pathway to take the sting out of sky-high insurance costs in flood and fire zones.
As many as one million Australian households are struggling to stump up the cash to insure their homes, with the growing risk of extreme weather sending premiums up and out of reach of many.
Nearly 90 per cent of policyholders had their premiums rise at the last renewal, CHOICE analysis found, with the official consumer price index recording a 14.2 per cent jump in the broader insurance category in the year to June.
The escalating problem has prompted consumer group CHOICE to call for urgent action from industry and government, including a pilot of government-subsidised insurance targeted to income level and risk.
CHOICE chief executive officer Alan Kirkland said a subsidy would need to be "really carefully designed" to avoid incentivising people to stay in risky situations.
But Mr Kirkland told AAP there was a role for subsidies to protect the "many, many properties" built in areas most vulnerable to extreme weather events.
"Insurance is completely unaffordable for many people living in those places, and many of them are on low incomes," he said.
Mr Kirkland said there was a place for targeted subsidies alongside a broader response to the insurance affordability problem.
The issue will be canvassed in a wide-ranging federal parliamentary hearing into the matter after devastating floods in 2022 that hit several states.
Financial Services Minister Stephen Jones officially introduced the inquiry, which will also scrutinise concerning delays and disputes on claims, in parliament on Monday.
"Natural disasters are happening more often and they're getting worse. And, of course, there's inequality at the centre of it," he said.
The CHOICE report, which was prepared in partnership with the Climate Council, NSW Tenants Union, Financial Rights Legal Centre and Financial Counselling Australia, also called for tougher regulations to protect rental properties from floods and other extreme weather events.
The report called for tweaks to tenancy laws to make sure landlords take "reasonable steps" to safeguard properties from climate risks, such as lifting power sockets up out of reach of flood waters.
Other recommendations include insurers doing more to recognise adaption attempts in their pricing - something Mr Jones has alluded to - and more financial assistance to help people make changes to their properties.
The report found nearly half of all policyholders would consider investing in measures to lower the cost of their premiums even though, in many cases, insurers do not recognise such adaptations.
As a last resort, the group called for supported and planned relocation for high risk communities.
