Are insurers taking them for a ride?
The odds of people making a claim on their insurance shouldn’t have increased, and considering the car itself has decreased in value, you’d think premiums would go down instead. Are some insurers taking consumers for a ride?
“Recent research* shows that more than three-quarters of car insurance customers automatically renew their policy each year,” said Abigail Koch, spokesperson for comparethemarket.com.au. “It’s these customers that renew without shopping around that could end up paying the lazy tax.”
“Insurance providers know that most people will take the easy option and renew their policy despite a rise in premiums. Insurers just have to make sure the price rise isn’t so large that it encourages customers to look elsewhere for a cheaper price.”
Research** from comparethemarket.com.au suggests 84% of people think they’d get a better deal on their insurance if they shopped around. But with 50% of respondents saying they don’t have time to compare policies – it’s the insurance companies that win by making the most of our ‘laziness’.
“Consumers are not rewarded for their loyalty,” said Abigail. “Some insurers entice customers in with low price deals and then increase premiums after the first year. A simple way to check if you’re on the best deal with your existing insurer is to reapply as a ‘new’ customer. I believe people could be surprised at the difference in price between what they’re paying now and what they’d be offered as a new customer.”
Another reason consumers may be on the back foot when it comes to car insurance is lack of competition. Australia’s car insurance market is dominated by a duopoly (Suncorp & IAG), commanding a 65% market share. Even though it may seem that there are a wide range of brands and products available, these are primarily underwritten by the same two companies.
“It’s a win-win situation for big insurers. They benefit from lack of competition and high prices, as well as consumers’ inertia when it comes to seeing what else is available.
“The only way that consumers are going to save when it comes to renewal time is to be proactive and compare policies to see if there’s a better deal out there. Do the ‘new customer test’ – if you’re offered a better price then bring it up with your insurer and let them know it’s unfair that they’re not rewarding you for your loyalty,” added Abigail.
** McCrindle Research, commissioned by comparethemarket.com.au, January 2013