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What’s the Deal With Car Insurance Premium Increases?
What’s the Deal With Car Insurance Premium Increases?
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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Long story short
Inflation and supply chain issues can drive premiums upward
A shortage of mechanics and rising repair costs mean claims cost more – and are often passed onto customers via higher premiums.
Your age, the car you drive, and where you live also shape what you pay
Insurers might look at factors like your driving history, where you park your car, and how you use it.
There are still ways to keep your premium down
Opting for a higher excess, paying annually, or limiting how much you drive could help cut your costs.
What is a car insurance premium?
A car insurance premium is what you pay your insurer to insure your car over the policy term (which is generally a year). Typically, you can pay your premium in full at the start of the policy term or split it across monthly or fortnightly instalments. Several moving parts go into calculating your premiums, including your age, the car you drive, inflation, and so on.
So, put simply, a car insurance premium is the price tag on your car insurance policy. But unlike the Tuesday night steak special at your local RSL, car insurance doesn’t cost everyone the same amount.
Why does my car insurance go up every year?
A premium increase – as the name suggests – is when your insurer raises the cost of your car insurance. Between 2019 and 2024, comprehensive car insurance premiums increased by 42%, the same amount as the average cost of claims over the same period.1Insurance Council of Australia – Motor Insurance Policy Paper: A Roadmap for Reducing Rising Premiums
While a price hike is hardly ever good news to a policyholder, insurers often have their hands tied when it comes to deciding your premium. This is because broader market events tend to influence premium increases.
Factors that can affect your car insurance premium
You
- Your age
- Your driving experience
- Your claims history
- Any driving offences
Your situation
- The car you drive
- How you use it
- Where you live
- Any additional drivers
Broader factors
- Inflation
- Cost and frequency of claims across the industry
- Natural disasters
- Skills shortages
How much notice do insurers give before increasing premiums?
Typically, insurers send you a renewal notice at least 14 days before the day your car insurance policy is set to renew. It should include any changes to your cover, especially (you guessed it!) a premium increase.
You can use this time to go over the product disclosure statement (PDS) and consider whether or not it makes sense to continue with your current insurer. A lot may have changed since you last took out car insurance – maybe you’ve moved house or don’t drive as much as you used to. Generally, it’s a good idea to review your cover once a year.
If you’re one of the savvy ones, you might compare your policy with other insurers and switch to one that not only helps keeps your expenses in check but may also bring more value and features to the table – it’s a potential win-win!
Helpful tip
Unfortunately, premium increases seem to be one of life’s certainties. That said, there might be ways to lower your costs. For instance, if you only drive a certain number of kilometres a year, a pay as you drive policy might help lower your premium. And there are other steps you can take that might help offset a premium increase: opting for a higher excess, switching to annual payments, restricting younger drivers, or parking your car in a lock-up garage overnight if that’s an option.
Adrian Bennett
General Manager for General Insurance
Why is car insurance so expensive?
Just as changes to your personal situation can cause your premium to climb, so could changes to inflation, global trade, natural disasters, and the like. Take supply and demand for instance: disrupted supply chains and a shortage of skilled mechanics helped push average car insurance premiums up by $313 between 2019 and 2024.
How can I save on my car insurance premium?
One way to ensure you’re not paying more than you should for car insurance is to compare policies. Use our comparison tool to see what our range of providers have to offer. If you like what you see, you can switch in just a few minutes.
Get started on comparing car insurance policies!
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