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The final quarter saw the Consumer Price Index (CPI) climbing by a modest 0.6%, yet insurance rates rose markedly by 3.8%, following a 2.8% increase previously. This uptrend is attributed to insurers revising rates upward, responding to the devastating Queensland and NSW floods of early 2022 and subsequent floods later that year, linked to the La Nina phenomenon.
ABS’s Head of Prices Statistics, Michelle Marquardt, highlighted the escalation in insurance cost due to pricier motor vehicle, house, and home contents insurance premiums, marking the sharpest year-over-year elevation in over two decades.
The marked increase in insurance payments is contributing to the financial burdens carried by households. The ABS annual summary of living costs underscores the impact of rising insurance and financial services on family budgets, alongside the sectors of housing, and food and beverages.
Breaking down by household type, the recorded increases in insurance expenses ranged from 16.6% to 17.3% — record figures signifying the highest upticks ever noted. The Insurance Council of Australia (ICA) acknowledges that the repercussions of recent natural catastrophes continue to reverberate through insurance costs.
The ICA explained rising premiums as a ripple effect of repetitive natural disasters, increasing asset values which in turn elevate the cost to replace them, inflation influencing repair costs for buildings and vehicles, and the surge in capital costs for insurers. Following the Black Summer bushfires, insurers have settled claims surpassing $16 billion from multiple disaster events, hence influencing the premium costs for the broader customer base.
Measures to alleviate the pressure on insurance prices are a priority, with the ICA championing interventions such as fortifying infrastructure against calamities, revising land use and construction codes, setting up home repurchase initiatives, and advocating for the removal of state taxes, which significantly inflate insurance premiums.
On a positive note, customers may soon witness a plateau in rising insurance expenses. As per Scott Guse, a partner at KPMG with specialization in insurance, inflational factors influencing insurance costs are beginning to decelerate, although upcoming weather conditions could play a decisive role in pricing trends.
Kate Browne, who oversees research at Compare Club, conveys that the crushing weight of living costs is being felt by Australians, with insurance assuming a pivotal part in the financial strain faced by many. During a recent study, it was clear that insurance bills have imposed considerable stress among people, a situation that has only worsened since the start of 2023. Moreover, the ramped-up premiums for homes, cars, and linkages to geographic areas prone to adverse weather conditions further accentuate the widespread expense escalation.
Consequently, a growing number of consumers are actively seeking ways to economize insurer spending by shopping around. Nonetheless, Browne indicates a looming apprehension that opportunities for additional budget tightening may soon run dry for Australians seeking to offset these surges.
Published:Thursday, 8th Feb 2024
Source: Paige Estritori
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