Why does my car insurance price change?
A car insurance premium is based on more than the car you drive. Insurers also consider things like repair costs, weather events, where you keep your car, and the level of cover you’ve selected. When these change, your price may change too.
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When you get a car insurance renewal, you may notice a change in your new premium – and you’re probably wondering why.
Drivers of higher insurance premiums can include:
- Increases in the overall costs of claims
- Severe weather events and natural disasters
- Changes in government taxes and charges
- Inflation.
What can affect premiums in Australia?
Higher repair costs
Cars are more complex with sensors, cameras, and other electronics, so repairs can be more expensive, even for minor damage.
More expensive parts and delays
Global supply issues and inflation can make parts harder to get and more expensive, which can increase claim costs.
Higher vehicle prices
Certain makes and models have increased in price over the last few years, which means the cost to replace them has also increased.
More claims overall
As both the volume and value of incidents increase, insurers generally adjust premiums to cover higher claim costs.
Extreme weather events
An increased number of weather events, such as floods, storms and bushfires have led to more claims across Australia, which can see an increase in premiums.
Inflation across the economy
Labour, materials and service costs have all gone up, leading to increased claims costs, which can result in higher premiums.
How insurance works
Put simply, insurance works like a pool of funds policyholders pay into. When someone makes a claim, the payout comes out of that pool, along with the cost of providing insurance, including reinsurance.
Insurers estimate future claims based on data, trends, and risks – such as weather events like storms or floods. Then they set premiums to ensure there’s enough in the pool to cover them.
How are insurance premiums calculated?
The total premium you pay for your insurance is made up of several components. Some are set by the insurer and others by the government, like the NSW Emergency Services Levy, GST and stamp duty.
What you pay will usually be based on your personal details and situation, including the type of cover selected, your sum insured, and any optional benefits you’ve included. Previous claims and the excess you choose will also come into play.
Find out more about how we price premiums
What else can affect your car insurance premiums?
Key pricing factors include:
- Where you live
- Where you park your car
- What you use your car for
- How long you’ve owned your car
- Whether you’ve financed your car
- Your selected basic excess
- Your claims history
- Changes in your car’s value
- Whether you’ve chosen Market Value or Agreed Value for your car
- Whether you pay annually or monthly.
Related article: How to determine used car value
How can I reduce my car insurance premium?
Look at your basic excess
Choosing a higher excess may reduce your premium, but it means you’ll have to contribute more if you make a claim. When choosing your excess, think about what you’d be able to contribute at short notice, in the event of a claim.
For example, if your car was in a crash that was your fault, and you had a basic excess of $750, you’d pay $750 towards the cost of repairs.
Your Certificate of Insurance will show any excesses applicable when you make a claim.
Check your level of cover regularly
It’s worth checking your current policy still matches your needs. If things have changed, you could adjust your cover and additional options.
A quick check every renewal time can help ensure you’re not paying for cover you no longer need.
Payment frequency
Paying in instalments can make budgeting easier, as your premium is spread across smaller payments. But it may cost more overall than paying annually. That’s because our data shows customers who choose to pay in instalments generally have higher claims costs.
Bottom line
If your car insurance premium changes it’s only natural to wonder why. And while it might be tempting to reduce your insurance cover, it’s important to have adequate protection, should the unexpected happen.
If you need help understanding how to get the most value from your car insurance policy, talk to us or get a car insurance quote today. At the heart of it, we’re here to provide protection for your car on the road.