02.Switching and excess
Motor insurance is a congested and increasingly competitive market. However, like other forms of insurance, rising premiums are a common complaint CHOICE gets from our members. Despite this, a significant proportion of consumers remain loyal to their current insurer – something we believe is a contributing factor in renewal premiums being raised each year.
One-third of the insurers we surveyed admitted that, all other factors held constant, premiums for renewal will be higher than premiums for new business. This is essentially the price consumers are paying for their reluctance to switch – or to put it more harshly, a lazy tax.
Several insurers attribute the difference between the premium for new business and the premium for a renewal to the online discount, which is generally available to new customers but not included when renewals are sent to existing customers.
You should always check your insurer and at least three other insurers' quotes online before renewing your premium. Only seven out of the 39 insurers we reviewed – 1300Insurance, Budget Direct, Coles Insurance, NRMA Qld, SGIC, SGIO and TIO – said they would match or beat competitors' quotes, usually as part of a campaign. However, if consumers show more of a willingness to switch then insurers will have to recognise this in their premiums or risk losing business to their competitors.
Most insurers will allow you to increase the level of excess you pay in exchange for a lower premium.
You can think of the excess as the amount for which you are your own insurer. Ask yourself, “how much can I afford to fork out without notice should something go wrong?”
If you’re able to absorb more than the standard excess, then you should. Not only does increasing your excess reduce your premium upfront, but it can also protect you against future premium increases. The majority of insurers we surveyed said your premium could increase or an unprotected no-claim discount (NCD) could reduce if you make a small claim under $1000. Other claims that can commonly increase your premium are windscreen claims, theft, hailstorm and collisions with an animal.
Even if your NCD is protected, the insurer can increase your premium based on an adjusted risk weighting. About half the insurers in our review said your premium could increase for an at-fault claim, even if you have NCD protection. So if you don’t pay for a small repair yourself now, your insurer will likely make you pay for it in future.