ICA calls for reforms as motor insurance premiums hit A$1,052 in 2024

Car repair bills now making up 60% of claim costs. 

Comprehensive motor insurance premiums have risen 42% since 2019, reaching an average of $663.33 (A$1,052) per year in 2024 due to escalating input costs, according to the Insurance Council of Australia (ICA).

Claims costs have increased by 42% over the same period, driven by rising expenses for vehicle replacement, parts, and labour. 

Repair costs have climbed 26% since 2022, with repair bills now making up 60% of claim costs. 

New car prices have surged by up to 39% since 2019, whilst used car values are 32% higher, pushing up claim payouts for write-offs, which account for a quarter of all claims.

Rental car costs have risen 70% due to longer repair times and the influence of credit hire firms. 

Insurance fraud cost the industry $353.10m (A$560m) in 2023, and credit hire claims, which have quadrupled since 2019, are on average three times more expensive than standard claims.

Despite rising premiums, data from APRA indicates that underwriting profits for motor insurance have declined. 

Insurers' costs as a proportion of collected premiums have grown from 89% in June 2019 to 94% in June 2024.

The ICA is calling for several key reforms, including addressing labor shortages in the motor trades sector, strengthening supply chains by expanding the Motor Vehicle Information Scheme (MVIS), regulating accident towing and storage fees, cracking down on insurance fraud, implementing stricter oversight of credit hire companies, and aligning New South Wales’ written-off vehicle laws with other states.

ICA CEO Andrew Hall stated that whilst insurers are taking steps to manage costs, many factors driving premium increases are beyond their control. 

He urged federal, state, and territory governments to implement targeted reforms to ensure affordable and sustainable motor insurance for Australians.

($1.00 = A$1.59)