Why are insurance premiums rising?

“At RACQ, we are very aware of these pressures and are always looking for ways to support our 1.8 million members. This includes being open and transparent about the decisions we make about the price of premiums,” he said.

“There is no denying the insurance industry is facing a perfect storm of challenges – the increasing severity and frequency of extreme weather events on top of supply chain pressures have significantly increased the cost of doing business and forcing us to make tough decisions when it comes to the price of premiums.”

Impact of climate change on insurance premiums

Sayers said that insurance premiums in Australia are skyrocketing because climate risks are increasing.

“Natural disasters are becoming more frequent, destructive, and expensive,” he said. “To exacerbate the issue, in Australia, there has been limited investment in disaster mitigation over the years, which would have helped to reduce the risk and bring down the cost of providing insurance.”

RACQ is calling for investing more in natural disaster mitigation and resilience initiatives. Last month, it urged the federal government to ensure that its disaster mitigation funding is spent correctly.

Annual inflation’s impact on insurance premiums

RACQ noted that the Australian insurance industry faces record levels of annual inflation – over 10% – impacting the cost of repair for home and motor claims. The insurer’s panel of builders deemed the current cost of materials “dramatic,” particularly in Queensland.

“A shortage of qualified trades in both the automotive and building industries – along with the increasing complexity of car repairs as vehicles become more sophisticated and technology-enabled – means we will continue to see an impact on our claims costs,” Sayers said.

“I want to assure our members that every pricing decision we make is with [them] in mind,” Sayers continued. “As a member-based organisation, we’re doing everything possible to minimise premium increases for our members while ensuring the Club continues to be financially strong to serve [them].

“We understand this is a challenging environment, and the last thing we want is to put more pressure on our members.”