During renewal season, brokers updating residential sums insured face a critical challenge: home rebuild costs have outpaced general consumer inflation over the past five years.
New data from the Insurance Council of Australia reveals that standard home rebuild costs in Queensland and northern Australia have increased significantly since 2021, leaving policies based on older assumptions potentially underinsured.
Key Factors Driving the Rebuild Gap
Cost Versus CPI Growth
Drawing from Cordell Construction Cost Index data, building costs rose approximately 30% in the five years leading to March 2026, compared with a 24% increase in the Consumer Price Index.
Targeted Material Price Increases
Price increases have been particularly significant for materials most vulnerable to severe weather events.
Over five years, roof tiles increased by approximately 77%, more than three times the increase in CPI. Windows, plaster, plywood, copper piping and concrete also experienced increases of between 37% and 48%.
Trades such as roofers and glaziers experienced similar wage increases, further increasing the overall cost of rebuilding a property.
Pressure from Extreme Weather
Between 2022 and 2026, insurers handled more than 400,000 declared event claims with a combined value of approximately $11.3 billion.
In 2025 alone, weather damage affected 145,392 homes, nearly equalling the 172,657 new homes built nationally during that year.
Compounding Construction Demand
During the 2025–26 period, seven declared catastrophe events generated approximately $3.98 billion in insured losses.
Pressure on trades, labour and building supplies is expected to continue as demand increases from major projects, including AI data centres and infrastructure associated with the 2032 Olympic Games.
Key Takeaways for Brokers
The Indexation Trap
Automatically indexing policy schedules using standard CPI can leave clients exposed to silent underinsurance.
If a home’s rebuild cost has increased by approximately 45% since 2021, relying on an outdated sum insured could result in a significant shortfall following a total loss.
Mitigation Discounts
To help offset rising premiums, some insurers now offer pricing credits for verified home resilience ratings.
This may provide brokers with a practical opportunity to reduce the peril component of a premium through verified client mitigation works.
A sum insured should reflect the current cost of rebuilding the property, not simply the previous policy limit increased by CPI. Reviewing construction costs, materials, labour and catastrophe exposure is an important part of avoiding underinsurance.