Cost pressures on insurers push the average price of car insurance to a record high. The average price paid for car insurance in the second quarter of 2023 continued its upward trend as insurers battle sustained cost pressures, such as a 33% rise in vehicle repair costs, according to the latest industry data. In June 2023 analysis from international consultants EY said that “the Australian car insurance market experienced its worst performing year in a decade in 2022’. Their report highlighted that for every $1 car insurers received in premiums, they paid out $1.10 in claims and operating costs. In the second quarter of this year: The average premium paid for private comprehensive car insurance was up 7% on the previous quarter. The current average premium is 21% higher compared to Q2 2022. The average price paid by motorists renewing their cover rose by $36 on the previous quarter to $471, while the average premium for a new policy was up $21 to $566. The distinction reflects the different risk profile of new and renewing customers. For example, a new customer may be more likely to be a younger, less experienced driver. Canstar’s analysis for the year ending June 2023 found the average cost of comprehensive car insurance in Australia is $2,184 for females under 25, $2,437 for males under 25, $1,733 for ages 25-29 years, $1,312 for ages 30 to 49 years and $1,006 for ages over 50 years. Higher premiums reflect continued rising costs for insurers. In total, insurers paid out £2.4 billion in all car insurance claims – theft, vehicle repairs, and personal injury – in the first quarter of this year. This was up 14% on Q1 2022. The costs of vehicle repairs leapt by 33% over the year since Q1 2022 to £1.5 billion, the highest figure since ABI started collecting this data back in 2013. This reflects rising costs, including energy inflation, and more expensive repairs. Increases in labour costs reported up to 40%. The cost of replacement parts for many popular cars have increased between 12 -21% over the past year. These continue to be tough times for many motorists and with many families facing higher cost of living bills, no one wants to see the cost of their car insurance rise. Carpeesh remains determined to ensure that car insurance remains as competitively priced as possible, but this has become increasingly challenging, given the continued rising costs that they are facing. If you want to discuss how to be able to afford your car insurance, contact us on 1300 101 311 to see what options you might have to reduce the price you pay. Carpeesh does not charge you any service fee to change your cover arrangements and it’s always worth checking that you pay only for what you want and need.” Across the industry, car insurance prices have risen, mainly due to claims costs and rising inflation. APRA reported that the current average insurance price was 15% higher in the first three months of this year compared to 2022. It also reported that the average price of second-hand cars has jumped by 30% in three years and that many new cars are more sophisticated, meaning fixing them is more expensive due to the electronic calibration of sensors and lack of mechanical repair options which impact the cost of claims. How is the price of my car insurance calculated. The price of your car insurance cover reflects a range of factors, including the expected future cost of settling claims. This means that car insurance renewal prices are not guaranteed to be the same or lower than last year. There are many factors influencing the price you pay including: You and your driving habits. Your age is a really important factor when it comes to your car insurance as typically younger drivers are a higher risk of being responsible for a collision than older drivers. However, many younger drivers are better drivers than their parents’ generation – they have to pass a more demanding test and have learnt to drive in more congested traffic. Carpeesh offers every Policyholder the opportunity to earn DrivePoints by using the Carpeesh Driver Safety App which shows you how you drive. The higher your DrivePoints the less you will pay at your renewal. The length of time you’ve held your licence can also impact your price. Newer drivers are typically a higher risk than more experienced drivers. If you drive your car during rush hour or commute to work, you might see your price affected as this suggests your car will be driven during busy periods and more likely to be involved in an incident. Spending more time on the road and doing more miles a year will also impact the price of your insurance as you’re more likely to be in an accident, simply because you drive more. The type of car you drive Your car has an impact on the cost of your insurance which is why your price may change if you change your car. Every new car sold in Australia has to meet Australian safety guidelines and each car is placed in an insurance group which is determined by: the type of car cost of repair of that car including cost of parts and paint its power to performance ratio the level of safety equipment the level of anti-theft security Insurers can also look at the age, model and value of your car – but these rating factors differ from insurer to insurer who can use their own claims experience to determine the price you pay. Your address When we calculate your insurance price, we ask for your postcode and street address to look at your neighbourhood. We look at the number of claims in your area and whether they are due to theft, damage, and the volume of traffic to name a few. We consider where your car is kept at night and the parking arrangements you provide for it. If you move, you could see your insurance price go up or down depending on the risk presented in your area. We look at the different types of claims that are made by your new neighbours – for example, if there are more claims for damaged or stolen cars in your new area then you may see your insurance premium go up. Who drives your car We look at the details of any additional named drivers including their driving history, claims and convictions. Depending on their circumstances, this can change the cost of your insurance. It is recommended that a younger driver add a parent or older relative to their listed drivers as this may reduce the price to pay. Your accident and claims history All insurers will ask for your claim history – this includes any previous incidents, accidents, or claims. At Carpeesh we ask for claims, accidents, and convictions for the previous five years. We will validate this information when you make a claim. We look at your accidents and past claims to determine if you are less of a risk than a customer who doesn’t have any previous claims or convictions. Drivers with motoring offences on their licence are considered a bigger risk on the road than drivers who have none particularly if you have had your licence suspended or cancelled or been issued with a Good Behaviour Bond. The severity of an offence will also dictate how much your price is impacted. The cost of claims As well as any claims you make affecting your car insurance price, claims made across the country are also considered. Whether you need cover for your car or home, everyone’s price helps pay for the total cost of claims caused by flooding, fire, or weather. Your payments are used to pay for things for everyone in your neighbourhood. Each year we predict whether the cost of claims for the year ahead will go up and we’ll adjust our prices. The increased cost of claims is the main reason car insurance prices have gone up so dramatically over the past year or so. The cost of insurance policies was generally low after the COVID-19 pandemic, as we experienced lower claim volumes because everyone was staying home more. Other external factors have added to the increased cost of claims since then including: Severe weather – The extreme hot and cold weather we have experienced over last year led to more weather-related claims. Car theft – a significant increase in 2021/22 after years of reductions in most states and territories. This, combined with fewer parts available, has made settling claims costlier. Source: CarSafe Car repairs – Like everything else, repairing your car, hiring skilled mechanics, and running a business is more expensive now. For example, the cost of repairing vehicles has increased by 33% and labour costs are up more than 40%. Energy crisis – Energy prices have risen dramatically since 2022, which has added more than $140 to the cost of each repair. Delays to parts – Around 40% of work is affected by parts delays meaning cars are likely be in the smash repair garage for longer. Australia imports nearly all new vehicles and new parts for repairs. Inflation impact – You might not know this, but inflation affects how we calculate insurance prices. As car insurance cost is for a year of cover, we price our current policies for future inflation and the inflation that has occurred to date. This is because a claim can take months to settle, and inflation continues to apply until we settle a claim. If the costs of repairs go up each year, this will be reflected in insurance prices. Fraud Insurance fraud leads to a rise in everyone’s price – this can be in the form of crash for cash fake whiplash claims. According to recent reports the total cost of insurance fraud costs all policyholders up to $80 per year. We do all we can to identify and deal with such fraud so that you don’t have to pay anymore than you need to. This includes asking drivers to provide a copy of their driving icence history to ensure what they declared when they purchased the policy is correct. Taxes State and Federal government levy taxes on insurance premiums. Stamp Duty and Emergency Services Levy are paid to state and territory governments and Goods & Services tax (GST) is paid to the Commonwealth. Every insurance provider must charge these taxes. What we’re doing to help We know that car insurance costs aren’t the only thing that’s increased over the past year, which is why there’s so much frustration right now. It’s not a situation we take lightly, and we’re doing everything to make sure our prices are a true reflection of the risk presented. We’re constantly monitoring the situation and our DrivePoints system offers good drivers the opportunity to reduce their insurance premium because of their safe driving habits. But just like every other business, the increase cost of things affects us and our suppliers. If you’re struggling to pay your insurance, please get in touch with us, and our friendly customer service staff who are all based in Australia to see how we can help. And remember, if you need to make a change to your policy, we make no charge for you to do so. Email help@carpeesh.com Call 1300 101 311.
