Key Points
- New data has revealed insurance prices increased by over 16 per cent in the 12 months to the December 2023 quarter.
- Experts and insurers say higher reinsurance, natural disasters and costly claims contributed to the higher premiums.
- The Insurance Council of Australia said insurers have experienced "very low profits" for three consecutive years.
If your insurance premium has gone up in the last year, you're not alone.
According to the, insurance premiums had their largest price increase last year since 2001.
So why is insurance becoming more expensive, and is there anything you can do about it?
How much are insurance bills increasing?
In the 12 months to the December 2023 quarter, insurance prices rose 16.2 per cent, according to the Australian Bureau of Statistics (ABS).
In the previous 12 months, to December 2022, prices rose 6.3 per cent.
In December 2023, financial comparison site Finder found car insurance prices had increased 19.8 per cent since the beginning of 2021.
According to Finder, the average comprehensive car insurance premium cost is around $130 a month.
Based on Finder's research, the average home insurance cost is $143 a month for a building worth $500,000 and contents valued at $100,000.
Why are insurance prices increasing?
According to the ABS, higher reinsurance, natural disaster and claims costs contributed to higher premiums for house, home contents and motor vehicle insurance.
A spokesperson from the Insurance Council of Australia told SBS News extreme weather events were driving the price increases.
"Premium prices are rising because of the escalating costs of natural disasters, the growing value of our assets making them more costly to replace, inflation driving up building and vehicle repair costs, and the increasing cost of capital for insurers," the spokesperson said.
Steve Mickenbecker, group executive for National Services at Canstar, said extreme weather events, paired with economic factors, had created a "perfect storm" for insurers.
He said insurers have faced more claims from customers, and higher costs to settle claims, leading to the increase in premiums.
"It's literally been a perfect storm for insurers because of these natural disasters; we've just had this pattern of diabolical weather events and floods in the last couple of years," he said.
"And of course with inflation, the cost of doing business has gone up (and) the cost of repairs and replacements have gone up as well.
"So it's just been a really terrible time for insurers with more claims and higher costs to actually settle claims."
In addition to the costs of repairs and business outgoings, he said a rise in crime had also contributed to rising car insurance premiums.
What can you do about it?
When it comes to insurance, loyalty often does not pay - but research does.
Uta Mihm, an insurance expert from consumer advocacy group CHOICE, advised customers to check their provider's website and get an online quote, as new customers are often offered a better deal than those who are renewing a policy.
"That is the best, easiest thing you can do," she said.
"The other thing you should do if you have been with your insure for 24 months or more is definitely to shop around - you can make huge savings."
She said increasing your excess can also decrease your premium, but will mean you will not be covered for small claims.
Some insurers also offer discounts for buying online, buying multiple policies, or boosting home security.
How much are insurance companies profiting?
The Insurance Council of Australia spokesperson said insurers have struggled to make profits in recent years due to the increase in claims and operating costs.
"Because of the long run of extreme weather events since the Black Summer bushfires, insurers experienced very low profits for three consecutive years, with improvements over the last year largely off the back of better investment returns and some commercial lines," the spokesperson said.
However, home insurance as a product collectively lost around $220 million for the most recent period for which data is available and remains under pressure.
"The ICA and insurers are strong and vocal advocates for measures that reduce risk and moderate pressures on premiums, including better land use planning, stronger building codes, and more investment in mitigation infrastructure, as well as removing state taxes on insurance."
