Yesterday’s inflation data revealed skyrocketing insurance premiums could drive the RBA toward a cash rate hike in August.
This relentless increase in insurance premiums, well beyond increases in other cost categories, is an inflation villain that could see us all suffer from higher interest rates this year.
If the government is serious about stemming inflation, then it's time they step in and address the insurance crisis.
The ABS’s latest Monthly Consumer Price Index Indicator shows CPI rose 4.0 per cent in the 12 months to May 2024.
A deep dive into the data shows insurance premiums rose a staggering 14.0 per cent during that time – the highest percentage gain across every expenditure class in the analysis.
This earmarks insurance as an enormous and disproportionate contributor to inflationary pressures.
Premiums are, quite frankly, out of control.
People need to realise the fallout from rising premiums isn’t isolated to policyholders.
The impact flows through to us all in myriad ways.
While an interest rate hike will be the most immediate widespread effect, rising premiums are devastating us in other ways as well.
For example, high insurance costs are seeing businesses across the country having to reduce spending and staffing levels and, in some cases, close their doors altogether.
This includes community facilities – small businesses such as restaurants, cafes, grocers, gymnasiums and many other operations that make up the fabric of our suburbs.
Higher premiums also mean less disposable income for households, which only adds to the pain for local businesses.
Higher insurance and interest rates result in less construction activity, so fewer homes are built in the middle of an accommodation crisis.
While several catastrophic events in recent years have contributed to greater premiums, there’s no doubt insurers themselves are running rampant in what they charge.
I know of several instances where runaway premiums have seen property owners choose not to insure their premises – both for residential and commercial real estate.
This puts them one tragic event away from financial ruin.
I’m also aware of businesses who’ve been refused cover, leaving them little choice between closing shop or taking on extraordinary risk.
The solution
The answer to explosive insurance premiums is multi-pronged.
Firstly, I’m calling for immediate regulation of the insurance industry.
It’s crucial government step in and stop insurers from quoting outrageous premiums that are decimating businesses, driving inflation and leaving Australians at risk of going broke.
Owners must also ensure they are accurately insuring their properties.
Be certain you have adequate cover, and that you are right across the terms and conditions in your policy.
This is where insurance brokers are invaluable.
Not only can they shop around to secure you the most competitive premium in the market, but they also simplify policy details and ensure there are no loopholes for non-payment by insurers in the event a claim is lodged.
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