All around Australia people have spent the summer taking cover from hailstorms, rain and floods. Now they must brace themselves for another storm. The cost of home and contents and car insurance premiums are going up as insurers try to recoup the high cost of claims for storm damage.

General insurers have faced some big claims for storm and flood damage. In the six months to December, storms on New Zealand's North Island led to $54 million worth of claims, storms around Lismore in northern NSW in October cost $130 million in claims, the Gisborne earthquake in New Zealand in December cost $31 million and the western Sydney hailstorm in December cost $400 million.

Insurers have issued statements during the past couple of months saying they will review premium pricing for home and motor policies. Insurance company representatives are reluctant to quantify the extent of the increase because, they say, each policy is priced separately - based on the likelihood of a claim being made.

For consumers it is a good time to review their cover and see if there are better deals. A better deal may not mean a lower premium; there might be more appropriate products on offer.

A KPMG review of four large general insurers (IAG, Suncorp, QBE and Allianz) in the December half-year shows a 26.8 per cent fall in net profit compared with the half-year for December 2006.

There have been other severe weather events since December that will have an impact on earnings in the June half.

After a number of years of underwriting profits, two of those insurers, IAG and Suncorp, reported combined ratios of 100 per cent or more. The combined ratio measures net claims incurred plus underwriting expenses as a percentage of net earned premium.

An insurer that reports a combined ratio of 100 per cent is making no money underwriting and is relying on investment income to make a profit - a very uncertain prospect in this market. Insurers are keen to restore profitability and that means consumers will have to pay up.

Chris Skilton, the chief financial officer of Suncorp, says that after several years of "highly favourable claims experience" claims had increased at a rapid rate. He says premium increases this year will be in the "high single digits".

Suncorp owns the AAMI, GIO, Australian Pensioners and Shannons brands and has joint ventures with the motoring associations RACQ in Queensland and RAA in South Australia. QBE, which is more of a commercial insurer, has not increased premiums on its personal products. Terry Ibbotson, the chief executive of QBE Australia, says that due to the impact of severe weather he expects "modest" increases in motor and home insurance premiums.

"We are yet to determine the exact amount and timing of any increases."

IAG, which owns the NRMA brand, said at its recent half-year results announcement: "Some segments, such as personal lines, will experience price increases in line with rising claims costs following increased frequency and severity of weather events."

Customers should talk to their insurance company to make sure they are being offered the best rate for their circumstances.

Most insurers have rates tailored for particular segments, such as the over 55s, and consumers may be missing out on a better deal.

Consumers should also find out what discounts are available if they have multiple policies with the one insurer. They should determine whether it makes sense to adjust their excess and bring the premium down.

They should also check to see if there have been any changes to policy conditions or new products that might offer them a better deal.

Full building replacement cover offered

One area where there has been change is in home insurance policies. There has been a move by some insurers to offer full building replacement instead of agreed-value cover.

This month ANZ started offering full building replacement on all new home insurance policies.

Rick Howe, the general manager of ANZ's insurance division, says home owners were running into problems with underinsurance because of the rising cost of building.

"These big weather events cause a spike in building costs. Costs went up 50 per cent after the Canberra bushfires and 75 per cent in Darwin after Cyclone Tracy," he says.

"The other problem with basing cover on an agreed value is that it is easy to get it wrong."

Established practice in Australia is for the customer to estimate the value of their home when taking out a policy. Valuations are often based on subjective judgments and can easily be inaccurate. ANZ has built a building cost calculator into its new policy.

Late last year the Commonwealth Bank's general insurance group, CommInsure, introduced greater flexibility into its home insurance products, allowing customers to remove insured events such as power surges and theft from their cover and adjust their premium payments accordingly.

Simon Swanson, CommInsure's managing director, says: "Customers told us they wanted more flexible products. We are giving them the option of adding or subtracting features according to their needs."