CommBank iQ report: Aussies spend more on insurance than almost anything else

Can they keep doing it?

CommBank iQ report: Aussies spend more on insurance than almost anything else

Insurance News

By Daniel Wood

As 2023 draws to a close, the percentage rise in the amount of money Australians spend on insurance is higher than the increases on any other item. According to CommBank IQ’s latest report, the 12% average increase on insurance spending beat utility bills or car running costs.

The figure may not surprise brokers accustomed to premiums hikes. Another striking fact in the report might: The only essential item Australians spend more on than insurance is food. The average person now spends $225 per month on their insurance coverages, more than their utility or medical costs.

Apart from signalling the ongoing strain of inflation and cost-of-living increases, are insurance industry stakeholders starting to see more of their customers in extreme difficulty. Are more customers cancelling policies?

So far, according to Daniel Gronert (pictured below), and Matthew Bates (pictured above), most insurance customers are managing to hang on.

Hanging on with more “cost consciousness”

“We are – thankfully - not seeing the majority of our clients in financial distress and we hope that continues,” said Bates who is managing director of insurance for Bell Partners.

However, the Sydney-based insurance adviser said his firm is conducting additional educational sessions for clients and focusing more closely on advice.

He said his firm is noticing increased “cost consciousness”m but mainly from domestic clients.

“In times of rising living costs, while it might be tempting for Australians to cut back on insurance costs, it’s crucial to ensure Aussies stay covered as these are the times they’ll find themselves least equipped to pay for extra expenses if they need to make a claim,” he said.

Brokers have an opportunity

Bates said now, more than ever, insurance is essential protection.

“Going without insurance in the face of an uncertain economy is like not having a safety net beneath a tightrope walker,” he said. “It’s not the first thing you notice missing, but boy, does it make a difference if things go wrong.”

Bates said these tough economic times present an opportunity for brokers to “show the value they can add.”

“Some initiatives taken here may see us having ‘commercial’ conversations around the impact of changing the excess, self-insuring some aspects of the policy and continuing to keep clients informed around differences in cover between insurers,” he said.

Bates attributed the rising insurance bills to inflation and cost-of-living spikes and also increasing reinsurance costs and increased claims from natural disasters.

However, for those in NSW, he said the government’s announcement of a review of the emergency services levy (ESL) on insurers, could help make insurance a little more affordable.

“On a positive note, we’re optimistic about Chris Minn’s [the NSW Premier] review of the levy - it’s a step toward making insurance more affordable for homeowners,” said Bates.

No surprises

Gronert, the CEO of premium funder Arteva Funding said the findings in the CommBank IQ report are concerning “but no great surprise really.”

“Australian homeowners have benefited from increasing asset values in recent years, however the cost to insure or replace these homes or vehicles has also been dramatically impacted by inflationary pressures and environmental events,” he said. “Annual policy renewal prices are likely to have increased significantly year on year as insurers pass on these costs to the insured.”

Gronert said, so far, his firm is not seeing “any widespread impact” on customers.

“We aren’t seeing a massive change in policy cancellations, however there are early signs of stress with a marginal increase in payment dishonours,” he said. “In our experience, insurance is generally one of the last bills people stop paying.”

Insurance for discretionary items looks down

Gronert’s firm has noticed an impact on discretionary rather than essential items.

“There may be evidence of a change in consumer behaviour though, as there are some signs that fewer policies are coming through for discretionary purchases such as boats, motorcycles, jet skis and the like,” he said.

Arteva has taken recent steps to deal with the growing economic pressures.

“In recent months we have strengthened our credit control and collections teams,” said Gronert. “We want to ensure we are best placed to support brokers and their customers who may be facing tough times in the months ahead.”

He said the firm has also reviewed its financial hardship policy and provided additional training to frontline staff facing these enquiries.

Are you a broker or insurer? Are you seeing signs that customers are struggling to pay for their insurance? Please tell us below.

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