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Surging insurance prices pile pressure on households

Home and motor insurance costs soared last year, vastly outpacing the 4.1% annual rise in the Consumer Price Index, Australian Bureau of Statistics data shows.

The lines grew at their fastest pace since March 2001, up 16.2%.

In the December quarter, the Consumer Price Index was up 0.6% while insurance moved 3.8% following a 2.8% rise in the September quarter, the bureau says.

The figures reflect significant price rises across personal lines after the 2022 floods.

“The increase in insurance was due to higher premiums across motor vehicle, house and home contents insurance,” bureau Head of Prices Statistics Michelle Marquardt said.

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

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

The Insurance Council of Australia 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.”

Some relief may be in sight. KPMG Insurance Partner Scott Guse told prices should be close to a peak as inflationary factors are slowing, but a lot will depend on the remainder of the storm season.