Insurance premiums have become one of the main drivers of inflation, along with rent and housing construction costs. These three factors are contributing to the sustained high-interest rates that are squeezing regular Australian households.
The big question is: are insurers playing us for suckers? The excuse for higher premiums has been that it’s because of natural disasters, but then why have all the big commercial insurers just reported huge profit increases?
The profit surge amid rising premiums
Take QBE. The insurance giant’s after-tax profits doubled to an eye-watering US$802 million (around AU$1.2 billion) in just six months, yet investors punished the company because it barely missed their expectations. If natural disasters were truly the reason behind higher premiums shouldn’t we see a more modest profit margin?
Then there’s IAG. They reported an 11% rise in insurance premium income over the 12 months to 30 June. Coupled with fewer weather-related claims, this resulted in a 7.9% jump in net profit to $898 million. When profits soar while premiums continue to rise, it’s hard not to feel like we’re being taken for a ride.
So what can you do about it? Here are a few ways you can fight back against skyrocketing insurance costs.
Step 1: Take control of your premiums
- Raise your excess: If you’re a safe driver or have a well-maintained home, think about raising your excess. Yes, this means you’ll pay more if you ever need to claim, but in return you could enjoy cheaper premiums. It’s a strategy that is particularly useful for those of us who rarely make claims and are looking to reduce everyday expenses.
- Update your details: Insurers calculate your premiums based on risk factors, some of which you might have control over. If you’ve recently moved and can now park your car in a secure garage, for example, this lowers your risk of theft and might also lower your premiums. Similarly, if you’re driving less than before, perhaps because you are now working hybrid or fully remote, see if you can switch to a low-kilometre policy.
- Limit drivers on your policy: Another way to cut costs is by removing younger drivers from your policy. Insurance premiums tend to surge if you’re covering inexperienced drivers, so if they don’t need to be on the policy then restrict it to certain age groups. You can always update your policy as your drivers mature.
Step 2: Be smart about your insurance choices
- Shop around for better value: Loyalty rarely pays dividends when it comes to insurance. While some insurers do have loyalty discounts, they’re unlikely to be as competitive as the deals available to new customers. It’s worth shopping around every year before renewing your policy. If your current insurer won’t match a better deal elsewhere, there’s only one thing to do: walk away.
- Take advantage of technology: Some insurers offer discounts for using a dash cam, which can be used as evidence in the event of a road incident. If you already have a dash cam, it’s worth checking if your insurer offers such a discount. Elsewhere, you can use a contents calculator to get a more accurate estimate of the amount you need to insure. This can prevent both overinsurance and underinsurance, which are common pitfalls that Aussies can fall into.
- Don’t automatically renew: It’s easy to let a renewal notice slip through to the keeper,
but this can be an expensive mistake. Always review your renewal notice to see what’s
changed, and don’t hesitate to negotiate or switch insurers if your premiums have gone
up without a good reason.
Step 3: Use free tools to your advantage
- Comparison tools are your friend: There are so many online comparison tools available that it’s never been easier to review policy features side-by-side. You’ll be able to find a product that suits your lifestyle, your current needs and – most importantly – your budget. There’s the potential to save hundreds of dollars on your premiums. Just make sure to read the fine print so you know exactly what you’re getting.
- Beware of so-called loyalty discounts: Loyalty discounts might sound appealing, but they can sometimes mask less competitive pricing. Don’t assume that staying with the same insurer is always the best option. You might find better value with a new insurer, even after taking into account the loyalty discount.
It’s time to stop letting insurers dictate the terms and start fighting back. Taking control of your premiums is as simple as shopping around and using some free online tools.
Bottom line: insurers are in the business of making money, but that doesn’t mean you have to be the one footing the bill for their profit margins. Take a few of these simple steps today so you can start getting a better deal.
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