Families have been hit with soaring car insurance premiums in the last 12 months, with the average premium rising by 7.95%, well above the inflation rate of 2.5%.
According to research by Canstar, premiums rose the most for families and Tasmanian drivers. The financial services company surveyed more than 28,000 car insurance quotes for different vehicles, drivers and policy types across Australia.
NSW and ACT drivers pay the most to insure their cars, and saw average premiums rise by 4.55% to $1,464. Victorian drivers suffered the second-highest rise in premiums, which jumped by 9.21% to $1,163, while Tasmanian drivers saw their average premium climb 11.75% to $813. Queensland premiums rose by 7.11% to $913, lower than South Australia saw a rise of 8.17% to $931. Western Australian motorists face average premiums rising 6.91% to $931.
Canstar research manager Mitchell Watson said car insurance premiums for families of $1,181 were among the most expensive, and rose more than 12% over the past year. Younger drivers under the age of 25 face a 10% increase to $1,361 to insure their vehicles.
Mr Watson said the number of insurance claims made by policy holders and a series of natural disasters, including floods, fires and severe storms could be blamed for the significant increase in premiums. A rise in insurance claims affects insurance companies and the additional costs are passed onto all customers. Suncorp (ASX: SUN), Insurance Australia Group (ASX: IAG), AMP Limited (ASX: AMP) and QBE Insurance (ASX: QBE) have been hit by storms and flooding in Queensland and NSW, as well as fires in Tasmania and Victoria in the past 12 months.
As a result it’s not just car insurance premiums that have increased but business and commercial insurance, as well as house insurance premiums. In some sectors, the risk of providing insurance has been deemed too high, and insurers have exited the sector altogether.
Rising numbers of claims mean the cost of reinsurance to insurance companies increases. Unfortunately for motorists in this case, insurers have no choice but to pass these costs onto consumers. The Insurance Council of Australia recommends consumers shop around for the best deals, but warned the cheapest policy may not be the best.
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Motley Fool writer/analyst Mike King owns shares in QBE.