Rising tides, rising costs: insurance premiums skyrocket in 2023

Insurance prices have seen their sharpest rise since March 2001, as indicated by the latest ABS Consumer Price Index (CPI). The 16.2% surge in insurance prices in the year leading up to December 2023 is almost four times greater than the overall rate of inflation, which stands at 4.1% for the same period.

It's pretty clear now that the big jump in insurance premiums is mainly due to the increasing number and intensity of weather events. In a previous bulletin, the ABS pointed out that as extreme weather happens more often, insurance claims go up, which in turn pushes up premiums. 

This is especially true with the kind of weather Australia has been facing lately. 

The added pressure on reinsurance costs, which is basically insurance for insurance companies, makes things even tougher when large-scale disasters become a regular occurrence.

Take recent events as an example. The storms and ex-tropical cyclone Jasper at the end of 2023 led to insured losses of over $743 million, as reported by the Insurance Council of Australia. This gives us a pretty solid idea of just how much these weather events can cost​​.

So, with weather like this happening more often, it's no surprise that insurance premiums are on the rise. It  highlights the need for both the insurance industry and people with policies to think about ways to deal with these increasing risks and expenses.

With that in mind, let’s look at a few ways you can save on your car insurance or home insurance premiums.

How to save on your car insurance or home insurance premiums

With the ongoing trend of rising insurance premiums, especially in the wake of severe weather events, here are some practical ways you can manage these expenses: 

• Annual policy check-up. Insurance companies often adjust prices annually, and what was a great deal initially might not remain the best option. Comparing quotes yearly can keep your expenses in check.
• Direct negotiation. A straightforward call to your insurance provider can sometimes lead to surprising savings.
• Adjust coverage to match your needs. Sometimes you may be paying for features you don't really use. Tailoring your policy to better match your lifestyle can often lead to savings.
• Invest in preventative measures. Taking steps to reduce risk, such as installing a home security system or taking a defensive driving course, can sometimes lower your premiums.
• Bundle your insurances. Many insurance providers offer discounts when you hold multiple policies with them.
• Pay annually. Some insurance companies will offer fairly significant discounts if you pay annually vs paying monthly.

Bottom line

Extreme weather events are a reality that's not going to change soon, and we can expect insurance premiums to reflect this. But, it's not all doom and gloom. With a bit of effort and smarts, there are definitely ways to ease the pinch.