Receiving my home insurance was an unpleasant experience last week. It went up 15 per cent since last year. This would have been fine except that it went up 10 per cent the year before, and the year before that, and the year before that.

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I'm not alone. The average insurance premium is now 50 per cent higher than what it was in 2020. Inflation on insurance prices (home and car) is running at an eye-watering 16 per cent, four times the overall inflation rate.

What's happening? There's a short-term cause that will hopefully go away soon. But there's a more worrying long-term cause that threatens the very business model of the insurance industry.

Without serious intervention, it threatens a full-blown insurance crisis in Australia.

Start with the short-term cause. House construction costs have been running hot. It's a global phenomenon driven by supply problems (think: Iran War) and strong demand (think: big infrastructure projects).

Worse still, many builders work on fixed-price contracts. The big increase in costs has pushed a bunch of them over the edge. The insolvency rate among construction companies has tripled since 2020, meaning fewer construction firms at exactly the worst time.

I thought none of this would affect me personally because I'm neither renovating nor building a house. There's just one thing I forgot: insurance.

The cost of insurance rises with construction costs since, if your house burns down, the insurance company is on the hook to build you another one.

It might be tempting (and, indeed, politically convenient) to accuse insurance companies of price gouging. But the data shows that insurance companies are haemorrhaging cash. Their profits are tanking as they try to manage their bottom line without annoying their customers too much.

Our construction woes will hopefully be temporary. The problem........

© Canberra Times