Loyalty tax: the secret reason why your home insurance is so expensive

Collage of a person comparing home insurance policies on their tablet.

New customer discounts are nothing new, especially in insurance. It’s part of the way businesses lure people in. If you sign up for a new home insurance policy, particularly one combined with contents or car insurance, you can usually expect between 5% - 20% off your first year’s premium. 

But once that year’s up, your premium jumps in value – which means loyal customers pay more than new ones. Not to mention insurance premiums usually rise year-on-year anyway, so someone who’s been with the same provider for five years could cop a steeper premium than someone who’s just joined.

So what’s the deal with the insurance “loyalty tax”? And how can you get around it and save?

Paying for staying: why the loyalty tax gouges your premium

House balanced against a stack of coins on a seesaw.

According to Honey Insurance, Australians on a renewed insurance policy pay 34% more on average in their second and third year of coverage than brand new customers – and 80% of Aussies renew their insurance policy without shopping around. 

“Offering a discounted amount for a new customer has become a marketing strategy in Australia,” says Honey Insurance, “but it is unfair to consumers, as it means they need to do a quote every year with other providers to truly understand what their policy is worth.”

This isn’t to say you need to switch policies every year to dodge the loyalty tax, says Honey, but it’s more about checking that you’re still getting good value and adequate coverage

“You don’t want to be penalised for staying with your current provider.”

The UK has already banned the loyalty tax as a business practice, mandating that customers renewing their policy should pay no more than new ones, and Honey Insurance is lobbying to make that happen in Australia, too. 

Until then, Honey explains that insurance providers have a responsibility to make getting a quote as simple and straightforward as possible. 

“One of Honey’s goals is to make the quote process quicker and easier by using third-party data to reduce the amount of questions we ask – this means people can check they have the right insurance faster and without friction,” explains the insurtech provider. 

“Honey discounts customers who reduce risk in their homes, not for simply joining.”

Compare home and contents insurance policies below. Don’t forget to read the product disclosure statement (PDS)!

Compare home and contents insurance - rates updated daily

Search promoted home insurance below. Advertiser disclosure. Important information on terms, conditions and sub-limits.
  • Home Cover - Buildings & Contents

    Main events covered
    • fire
      Fire
    • theft
      Theft
    • storm
      Storm
    • flood
      Flood
    Monthly payments
    cost extra
    Calendar icon
    Yes
    Underinsurance protection
    Underinsurance protection icon
    Optional ExtraUp To 30% Of Buildings Sum Insured, Applied Automatically For Eligible Policies
    New for old
    replacement
    Replacement icon
    Yes
    Details
  • Home & Contents Insurance

    Main events covered
    • fire
      Fire
    • theft
      Theft
    • storm
      Storm
    • flood
      Flood
    Monthly payments
    cost extra
    Calendar icon
    No
    Underinsurance protection
    Underinsurance protection icon
    No
    New for old
    replacement
    Replacement icon
    Yes
    Details
  • Home & Contents Insurance

    Main events covered
    • fire
      Fire
    • theft
      Theft
    • storm
      Storm
    • flood
      Flood
      Optional Extra
    Monthly payments
    cost extra
    Calendar icon
    Yes
    Underinsurance protection
    Underinsurance protection icon
    Optional ExtraUp To 25% Of Building Sum Insured
    New for old
    replacement
    Replacement icon
    Yes
    Details
  • Home & Contents Insurance

    Main events covered
    • fire
      Fire
    • theft
      Theft
    • storm
      Storm
    • flood
      Flood
    Monthly payments
    cost extra
    Calendar icon
    Yes
    Underinsurance protection
    Underinsurance protection icon
    No
    New for old
    replacement
    Replacement icon
    Yes
  • Home & Contents Insurance

    Main events covered
    • fire
      Fire
    • theft
      Theft
    • storm
      Storm
    • flood
      Flood
    Monthly payments
    cost extra
    Calendar icon
    Yes
    Underinsurance protection
    Underinsurance protection icon
    Optional ExtraUp To 30% Of Building Sum Insured
    New for old
    replacement
    Replacement icon
    Yes
    Details

* Terms, conditions, exclusions, limits and sub-limits may apply to any of the insurance products shown on the Mozo website. These terms, conditions, exclusions, limits and sub-limits could affect the level of benefits and cover available under any of the insurance products shown on the Mozo website. Please refer to the relevant Product Disclosure Statement and the Target Market Determination on the provider's website for further information before making any decisions about an insurance product.

^See information about the Mozo Experts Choice Home Insurance Awards