The Insurance Council of Australia (ICA) has called for urgent reforms as comprehensive motor insurance premiums in Australia have surged to an average of A$1,052 ($663.33) in 2024, marking a 42% increase since 2019. This increase is attributed to rising input costs, including higher expenses for vehicle replacement, parts, and labor, which have collectively driven up claims costs by the same percentage over the same period.
Car repair bills have been a significant factor, now accounting for 60% of overall claim costs. Since 2022, repair costs have climbed by 26%. Meanwhile, the rising prices of new and used cars, up by 39% and 32%, respectively, have further escalated claim payouts, particularly for write-offs, which make up a quarter of all claims.
In addition, rental car expenses have skyrocketed by 70%, due to longer repair times and the influence of credit hire companies. These costs have compounded the financial strain on the industry, alongside insurance fraud, which cost the sector A$560 million ($353.10 million) in 2023. Credit hire claims, which have quadrupled since 2019, are now on average three times more expensive than standard claims.
Despite the soaring premiums, data from the Australian Prudential Regulation Authority (APRA) reveals that underwriting profits for motor insurance have declined. Insurers’ expenses as a proportion of collected premiums have risen from 89% in June 2019 to 94% by June 2024, further highlighting the pressures faced by the sector.
In response, the ICA is advocating for key reforms to address these challenges. These include tackling labor shortages in the motor trades sector, enhancing supply chains through the expansion of the Motor Vehicle Information Scheme (MVIS), regulating accident towing and storage fees, intensifying efforts to combat insurance fraud, and implementing stricter oversight of credit hire companies. Additionally, the ICA is calling for alignment of New South Wales’ written-off vehicle laws with those of other states.
ICA CEO Andrew Hall emphasized that while insurers are actively working to manage costs, many of the factors contributing to rising premiums are beyond their control. He urged federal, state, and territory governments to enact targeted reforms to ensure that motor insurance remains affordable and sustainable for Australian consumers.
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