Insurance pushing cost of living upwards – how’s your cover?

It may surprise no-one to learn that Australia’s cost of living has increased over the past quarter. However, it was higher insurance premiums across house, home contents and motor vehicles that contributed to some of the largest price rises. Which could mean now is as good a time as ever, to be looking carefully at your current policies and comparing some alternatives to see if you could be getting better deals.

According to the Selected Living Cost Indexes for December 2023 from the Australian Bureau of Statistics (ABS), living costs rose by up to 6.9% for some households:

Selected Living Cost Indexes (LCIs) by household type and CPI, Australia, quarterly and annual movement (%)

Source: ABS

While these cost of living rises were driven in part by higher prices for alcohol and tobacco, insurance and financial services were found to have recorded one of the strongest rises of the quarter. This included rising home loan interest charges thanks to the November 2023 cash rate hike from the Reserve Bank of Australia (RBA).  

However, insurance saw annual price increases of 16.6% to 17.3% - the highest rises for insurance on record amongst the household types. This is reportedly due to higher reinsurance, natural disaster and claims costs affecting motor vehicle, house and home contents insurance premiums.

It remains to be seen whether insurance costs are likely to rise even further in the years to come in response to factors such as climate change. Previous reports have forecast that one in 25 Australian homes could be uninsurable by 2030, and that extreme weather insurance costs could triple by 2050.

If you’re afraid to open your next insurance renewal notice, it may be worth shopping around and comparing some alternative policy options to find out if another insurer may better suit your needs. 

You aren’t obliged to stay with your current insurer, even if they offer discounts or other loyalty rewards. In 2023, the Australian Securities and Investments Commission (ASIC) alleged some insurance companies may be employing tactics to increase premiums for loyal customers before offering policy renewal discounts.

As well as comparing alternative insurers, you could see if making changes to your insurance policy could affect the cost of its premiums. For example, you could consider switching to a higher excess to help shrink your premium, keeping in mind you could be out of pocket when making a claim. You may also be able to opt out of some optional coverage to help lower your premiums or take steps to help lower the insurer’s risk, such as adding security systems to your home or parking your car in a lock-up garage rather than on the street.

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