Car insurance is rising far faster than inflation. What’s driving the jump?

Car insurance companies are being urged to clarify the factors behind steep premium hikes, as Australia’s corporate regulator, ASIC, revealed that prices rose sharply above inflation in recent years. The review, published by ASIC today, found that motor vehicle insurance premiums surged by 8 percent in the year ending July 2025, marking a more than 42 percent increase since 2019. This has sparked growing concern among consumers, who have voiced frustration over the rapid rise in costs amid ongoing economic pressures. ASIC examined eight insurance brands operated by five major insurers, which together account for nearly three-quarters of the market. The investigation followed a notable uptick in customer complaints, with car insurance identified as the most complained-about product in the 2024–25 period. A key issue highlighted by ASIC commissioner Alan Kirkland was that renewal notices from the five insurers failed to adequately explain the reasons behind the premium increases. “Those rises are well above the rate of inflation,” he noted, adding that consumers are seeking clarity on the causes of the hikes. The regulator emphasized that while it does not set insurance prices, it oversees how companies communicate with their clients. In its findings, ASIC stated that insurers have not sufficiently informed customers about the factors contributing to higher premiums. This lack of transparency leaves consumers uninformed about the true extent of price increases and the potential benefits of shopping around. For example, some insurers charge more for payment plans such as weekly or monthly installments, yet fail to highlight that annual payments could save customers between 10 and 20 percent. A significant portion of policyholders, two-thirds, renewed their coverage with the same insurer without contacting their provider or comparing alternatives. Of these, 40 percent did not seek better deals, often believing it unnecessary or unlikely to yield results. However, nearly one-third of those who questioned their premiums managed to secure lower rates. Commissioner Kirkland pointed out that this demonstrates the importance of challenging current offers, noting that “loyalty doesn’t pay.” He explained that long-term customers who remain with the same insurer may end up paying more compared to new customers or those who actively negotiate. Despite the findings, ASIC stressed that the report does not indicate that insurers are deliberately exploiting consumers. Instead, it highlights communication shortcomings. “We don’t regulate the prices that insurers offer to their customers,” Kirkland clarified, “but what we do regulate is the way in which they communicate with their customers.” The regulator concluded that all major insurers fell short in providing clear and informative explanations regarding premium changes. This scrutiny follows broader regulatory actions targeting the insurance sector. Earlier this year, ASIC initiated legal proceedings against IAG-owned RACQ, accusing the company of sending misleading renewal documents to thousands of customers over several years. The complaint alleges that RACQ provided inaccurate comparison pricing information, despite repeated customer complaints. This marks the second instance of legal action against RACQ, having previously been fined $10 million in November 2023 for deceptive practices related to insurance discounts. As the regulatory spotlight intensifies, the insurance industry faces mounting pressure to improve transparency and responsiveness to consumer concerns. With continued scrutiny, the expectation is that insurers will take steps to enhance communication and provide clearer insights into the drivers of premium increases.