Car insurance costs are surging in Australia – here’s what the industry wants done

If you think your car insurance premiums have been putting a strain on your budget, you’re not imagining things, with prices soaring by more than 40 per cent in just six years.

This is something the Insurance Council of Australia (ICA) – the peak body for general industry insurers – wants to change, calling for the systemic cost drivers behind the increase to be addressed.

As detailed in its new Motor Insurance Policy Paper, the average cost of a comprehensive motor vehicle insurance policy has risen by 42.4 per cent since 2019, reaching a peak of $1052 in 2024.

According to the ICA, the cost of claims has been the primary driver of this, with the average claim size rising by 42.2 per cent across the same five-year period – well above the inflation rate of approximately 20 per cent from 2019 to 2024.

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The peak body said this reflects “higher costs of vehicle replacement, parts, and labour as well as increasing complexity of vehicle technology”, while “insurers are investing in streamlined repair processes and partnerships with repair networks to control costs”.

The ICA listed other factors behind the rise in insurance premiums, such as rental car costs (which have increased by 70 per cent since 2019), fraud and legal expenses, plus a higher volume of credit hire claims (now quadruple as high as 2019).

With these figures in mind, the ICA says there has been a decline in the profitability of motor vehicle insurance despite the rise in premiums, as insurance firms attempt to stay in the black.

The ICA has called for governments to assist reform in the industry, with a focus on addressing motor trade skill shortages.

It says supply chains can be strengthened by ensuring independent repairers have fair access to vital parts, and has called on the Motor Vehicle Information Scheme (MVIS) to be extended to better support these businesses.

The ICA is also calling for governments to regulate credit hire/accident management companies and towing and storage fees, and to combat insurance fraud – particularly from what it says are increasingly active organised fraud rings.

It also wants New South Wales’ written-off vehicle laws to be align with other states’ so that repairable write-offs can be re-registered after undergoing stringent safety checks.

“A 42 per cent increase in premiums over five years reflects the costs that insurers are managing but is unsustainable for Australian motorists,” ICA CEO Andrew Hall said in a media statement.

“Insurers are doing their bit to reduce costs – such as streamlining operations, negotiating better repair arrangements, and investing in the repair workforce – but the reality is many cost drivers are outside the industry’s control. 

“We need governments to step up with targeted reforms. The Insurance Council’s roadmap lays out practical steps that, if implemented, will remove inefficiencies and unfair costs in the system. 

“We look forward to continuing our engagement with federal, state and territory leaders and encourage them to work with us on these solutions. 

“Australians deserve access to affordable and sustainable motor insurance, and that will only be possible if we address these cost pressures at their source.”

While Tasmania has the lowest average motor vehicle insurance premium, the Northern Territory and Victoria are the two most expensive regions to get comprehensive coverage.