Car insurance premiums rise, despite less claims in 2020: What is the bigger picture?

With less people on the roads last year, it only follows that there were also less opportunities for collisions and less car insurance claims. In fact according to the Insurance Council of Australia, the frequency of car insurance claims dropped by a significant 16.4% in 2020. On top of this, the average number of people claiming fell by over 10%.

This left us wondering, if people were claiming less why then did car insurance premiums rise by around 2%? To understand this we had a chat with Mozo’s Finance Expert, Peter Marshall.

The bigger picture on insurance

An important thing to understand about car insurance is that it does not exist in a vacuum. Insurance for vehicles usually falls under the ‘general insurance’ umbrella. Some other types of general insurance include contents insurance, home building insurance, pet insurance, travel insurance and business insurance.

Marshall says the same insurance companies who provide cover for vehicles, also provide insurance for other sectors including home insurance. On this he says, “Home insurance is an area where claims increased significantly due to a particularly intense bushfire season and increased strong storms.”

He adds that the insurance business is a complex one in which the companies that underwrite our policies have to find a balance between providing cover and making enough profit to keep shareholders happy. In this instance, providers have had to review all options when trying to improve the financial position of their overall businesses.

So to recap: while car insurance claims did fall in 2020, unfortunately a lot of insurance providers have more on their plate than just cover for vehicles. Not only did the insurance industry have to pay out a lot following the bushfire crisis, but some also had to pay a sizeable amount of business insurance claims to businesses affected by lockdowns.

In fact,the net profit of the insurance industry in 2020 was around $35 million, compared to $3.1 billion in 2019, according to the Australian Prudential Regulation Authority (APRA). That’s a considerable difference!

Keen to reduce your premium?

Of course there are still ways you can reduce what you pay. A few of these include:

• Opting for pay-as-you-drive car insurance. If you drive less than you did in the past, you may be eligible for pay-as-you-drive or pay per kilometre car cover.

• Looking for discounts. Look on your provider’s website or give them a ring to see if they have any discounts that apply to you. If you’ve been a customer for a number of years, you might even be eligible for a loyalty discount.

• Driving safely. It might seem a bit obvious, but it cannot be stressed enough how being a careful driver and having a clean record can really help keep your premium down. This includes stuff like always putting your seatbelt on and not talking on the phone while driving. 

• Shop around. Do your research before you sign up to a policy. Gather quotes from multiple insurance providers and make sure that whatever plan you opt for has the right level of cover for your wheels.


You can get started on the last one by heading to Mozo’s compare car insurance page. Or have a gander at the options below.