00:00Insurance premiums are one of the biggest drivers of inflation.
00:06This chart shows the annual change in the cost of coverage, with policies increasing
00:11by 14% in the 12 months to June.
00:14Premiums are rising faster than inflation or the consumer price index, which increased
00:193.8% in the same period.
00:22So what happened at this point?
00:24We've had a combination of both inflation, the cost of building has risen around 27%,
00:31we've had 20 declared insurance catastrophes.
00:34Climate change, the cost of labour and materials, higher claim costs, and even the types of
00:39cars we drive are all working together to push up the cost of premiums.
00:44Why is insurance so expensive?
00:48The ABS data doesn't tell us exactly what's happening with each specific type of insurance,
00:53but we can look elsewhere to find out what's happening with car, home and health insurance.
00:57A report from the Actuaries Institute found the price of home insurance rose 28% in the
01:03year to March 2023, but for homes in flood-prone areas it was as high as 50%.
01:11Premiums have also been rising for car insurance.
01:14Research by Finder suggests they increased more than 10% in 2023, and are up nearly 20%
01:20since 2021.
01:22In better news, health insurance hasn't risen as dramatically.
01:26It's heavily regulated by the government, and annual price hikes need to be signed off
01:30by the health minister.
01:32Insurers had asked for premiums to increase by up to 6% from April, but were only approved
01:37for an average of 3.03%.
01:41But some private health insurers have raised premiums on some policies by more than quadruple
01:46the approved average, according to Choice.
01:49Any discussion about insurance is definitely going to raise up one topic, climate change.
01:55Payouts for weather-related claims have become more frequent over the last decade, pushing
01:59up premiums overall.
02:01The 2022 floods in South East Queensland and the Northern Rivers in New South Wales turned
02:06out to be the most expensive Australian natural catastrophe on record, leading to insured
02:11losses of $6 billion.
02:14Let's have a look again at the insurance inflation chart.
02:17The 2022 floods took place between February and early May, and we can see that insurance
02:22prices took off around September of that year.
02:25Flood is our most expensive peril that is insured in Australia.
02:29It adds the most amount to a premium.
02:32Even the Reserve Bank is worried about the impact of climate change on premiums.
02:35They can pass on the cost to their customers in the form of higher premiums, or they may
02:40simply withdraw coverage from high-risk regions.
02:43Repairing costs are increasing, and that's because it costs more to replace things these
02:47days.
02:48This chart shows they've risen steeply over the past three years.
02:52The cost to repair cars is also increasing, and that's partly because of the vehicles
02:56we're choosing to drive.
02:58Cars are becoming more complex pieces of technology, while at the same time accident rates haven't
03:03changed, but the cost of repairing those cars has gone up.
03:07But is there something else going on?
03:09How much are profits influencing your insurance premiums?
03:13For insurance company IAG, it made a net profit after tax of $407 million in the half-year
03:19ending December 2023, but this was down 13% from six months earlier.
03:26For Suncorp, in the second half of the year, it made a net profit after tax of $582 million,
03:33a 5.43% increase.
03:36For insurer QBE, it made a profit of $1.3 billion after tax in the full calendar year
03:42ending in December 2023, more than double compared with 2022, driven in part by higher
03:49income from premiums.
03:51But insurers say they're losing money from premiums.
03:53They're largely being subsidised by other forms of insurance and investment pools.
03:59We know that insurance premiums are really expensive right now, so what are your options?
04:04My recommendation always is shop around, make sure every year that you've got the
04:09best, most competitive premium available to you for the right sort of cover.
04:13There are other things you can do.
04:15Some insurers offer you a discount if you pay up front, and you can also play with your
04:19excess.
04:20For car insurance, you can pay a lower rate if you agree to drive fewer kilometres.
04:24These are all things you should consider next time that renewal notice comes in.
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