Why insurance premiums will spike in 2017
Why home and car insurance premiums are rising, and what you can do about it
Home and car insurance prices are set to rise by 4% in 2017, with CTP insurance in New South Wales predicted to jump by 13%, according to a new insurance industry report. This comes on top of a 3% price lift in 2016. These increases mean Australians could feel the squeeze from insurance premiums even more in the coming year.
The reason given for the CTP insurance price hike is the sharp increase in the number of claims, which might be related to the expansion of the compulsory third party insurance scheme through features such as the NIIS.
For home and car insurance, the report points to the increasing cost of claims as the main culprit. The average cost of home insurance claims went up by 12% last year, and the cost of motor insurance claims climbed by 5%.
Why are claims getting more expensive?
Australia’s housing boom has been good news for a lot of people, but it has also pushed up prices and increased the cost of supplies. As it gets more expensive for insurers to rebuild homes, they pass the costs onto the consumers.
For car insurance, claims inflation was at 5% in 2016, once again leading to higher costs for insurers and higher costs for everyone else.
While these increases can account for much of the 4% increase, it’s also worth noting that the insurance industry has been enjoying increased profitability from investments in recent years, and that the price increase is considerably more than the current 1.5% inflation rate.
The report notes that 2016 was a “relatively benign” year for natural disasters, which may lead to speculation that the industry is bracing for more severe weather events in the coming year.
What to expect
CGU notes that there has been a significant increase in both the scale and frequency of natural disasters in recent times, and that there’s also been an increase in the smaller storms and other weather events that don’t generate a lot of publicity, but still have a significant impact on the number and cost of claims.
Car insurance claims increase as roads get more dangerous in wet weather, and home insurance claims increase when it’s hot and dry. Australians, as well as the insurance providers, are caught between the two.
Premiums reflect the risk levels, and the trend of premium rises should have us worried about more than our wallets. Not all insurers will raise prices equally, and these increases can be a useful reminder for us to re-evaluate our insurance cover.
- Check your home insurance. If you haven’t checked it recently, your current policy may not provide the protection you need and it could be worth reviewing. It might be a good idea to take another inventory of your home value and your belongings, and check it against your sum insured.
- Check your car insurance options. The best time to switch car insurance is at renewal time, so you don’t have to pay the fees associated with changing mid-policy. When the time comes, you might also want to try to find some car insurance discounts to lower your costs.
Resource: 2016 J.P. Morgan Taylor Fry General Insurance Barometer