Home and motor insurance costs grew last year at their fastest pace since March 2001, surging 16.2%, according to the Australian Bureau of Statistics (ABS). 

The data shows insurance inflation outpaced the 4.1% annual rise in the Consumer Price Index. 

In the December quarter, the Consumer Price Index was up 0.6% while insurance had a “strong” quarterly movement of 3.8% following a 2.8% rise in the September quarter, the bureau says.

The hefty rises reflect moves by insurers to push through significant price increases across personal lines portfolios after the early-2022 Queensland and NSW flood catastrophes and La Nina-linked floods that battered the east coast later that year. 

“The increase in insurance was due to higher premiums across motor vehicle, house and home contents insurance,” ABS Head of Prices Statistics Michelle Marquardt said. “Over the past 12 months, insurance rose 16.2%, making it the largest annual rise since March 2001.”

The surge in insurance premiums has added to living cost pressures facing households.

ABS annual living cost data, released today, shows insurance and financial services, housing, and food and non-alcoholic beverages were the main contributors to household budget pressures.

Increases in annual insurance prices ranged from 16.6% to 17.3%, the highest rises for insurance on record across various household types.

The Insurance Council of Australia (ICA) says the fallout from catastrophes over the past few years is still hitting home.

“Wherever you live in Australia – whether you’re directly exposed to extreme weather impacts or not – premium prices are rising because of the escalating costs of natural disasters, the growing value of our assets making them more costly to replace, inflation driving up building and vehicle repair costs, and the increasing cost of capital for insurers,” it said.

“Since the Black Summer bushfires of 2019-20, insurers have paid out $16 billion in claims from 13 declared insurance catastrophes or significant events – events that are still having an impact on the price of premiums for every Australian insurance customer.”

ICA says it will continue to advocate for measures that reduce risk and help moderate pressure on premiums long term.

“These include investment in mitigation infrastructure, changes to land use planning and building codes, and home buyback programs, as well as the removal of state taxes on insurance, which add 10-40% to the cost of a premium.”

Some relief may already be in sight for consumers.

KPMG Insurance Partner Scott Guse told insuranceNEWS.com.au prices should be close to a peak as inflationary factors are slowing, but a lot will depend on the remainder of the storm season.

Compare Club Head of Research Kate Browne says the comparator’s research shows Australians are struggling with the rising cost of living, and insurance plays a part in that stress.  

“Our research in November showed general insurance bills are causing a lot of stress and that has risen since the same research was conducted at the beginning of 2023,” she told insuranceNEWS.com.au.

“We have seen rises in home insurance and car insurance across the board and, for those in areas affected by floods, cyclone and fire, even more so. All this adds up to the effect of costs rising not only across the whole sector but into related insurances too.

“We are seeing many more people getting on the front foot to switch and save money by shopping around. However, there will be a point where Australians start to run out of ways to tighten their budgets any further than they have.”