Why Car Insurance Premiums Keep Rising in Australia (And What to Do About It)

📈 Why car insurance premiums keep rising in Australia🔗

The Insurance Council of Australia's own analysis, published in its March 2025 Motor Insurance Policy Paper, is unusually direct about this: average claim size rose 42.2% between 2019 and 2024, more than double the rate of general inflation, and that claims growth is what's pushing premiums up. Five forces are doing most of the work.

Repair costs have exploded. Repairs, labour and parts combined, make up roughly 60% of every dollar insurers pay out in claims, and that dollar has become a lot more expensive. AMA Group, Australia's largest collision repair business, recorded its average repair price rising from $2,914 in early 2022 to $3,662 by FY2024, a 25.6% jump in three years. Two things are driving it: parts inflation (the ABS consumer price index for spare parts and accessories rose 25.9% between 2019 and 2024), and vehicle complexity. Modern cars are packed with cameras, radar sensors and lane-keeping technology, so a minor rear-end knock that once needed a new bumper now often also needs sensor recalibration and specialist diagnostics. Electric vehicles add another layer again, needing specialised parts and trained technicians, and with relatively few EV-capable repair shops, competition is limited and prices are higher. The knock-on effect: average repair time blew out from 38.57 days in 2019 to 61.25 days in 2024, a 58% increase, and every extra day is another day of rental car costs added to the claim.

Labour costs have surged. Skilled tradespeople are in short supply, and wages reflect it. Between 2018 and 2023, average weekly earnings for automotive electricians rose 54.5% (from $1,437 to $2,221), panelbeaters rose 32.9% (from $1,255 to $1,668), and vehicle painters rose 20.3% (from $1,283 to $1,544), according to ABS data cited in the ICA's policy paper. Labour alone accounts for around 30% of claims costs, so when the people fixing your car earn significantly more, every claim costs more to settle.

Vehicles themselves have got more expensive. When a car is written off, the insurer pays out its replacement value, and that value has climbed steeply. New vehicle prices in some segments rose by up to 39% between 2019 and 2024, and used vehicle prices rose around 32% over the same period, according to the Cox Automotive/Manheim Used Value Index. Total loss claims (write-offs) account for about a quarter of claims costs, and their frequency has grown by roughly 20% since 2019 as rising repair bills push more vehicles past the point where repairing them still makes financial sense.

Vehicle theft is rising fast, and it's uneven across the country. Nationally, 65,603 Australians were victims of motor vehicle theft in 2024, up 8% year-on-year, according to the ABS. Victoria is the clear outlier, with victim numbers jumping 41% in a single year. That's showing up directly in insurance data: the ICA recorded around 29,000 theft claims nationally in 2025, costing insurers roughly $485 million, up 2.5% on the year before. Strip Victoria out and claims actually fell 10% elsewhere in the country. In Victoria alone, 2024-25 saw more than 12,500 theft claims costing $243 million, a 25% jump in claims and a 37% jump in costs on the year before, driven partly by thieves increasingly targeting keyless entry systems.

Reinsurance costs get passed straight through. Reinsurance is, in effect, insurance for insurance companies, and when global reinsurance markets tightened to a 20-year high in the 2022-23 financial period, Australian insurers absorbed cost increases of around 20-30% and passed much of that through to policyholders. APRA data shows motor reinsurance expenses rose from $2,046 million in FY2019 to $2,470 million in FY2023, a 20% increase.

The cumulative effect on affordability is real. In 2019, Australians spent an average of 43.6% of one week's income on annual comprehensive motor insurance. By June 2024, that had risen to 53.7%, according to the ICA. In the Northern Territory, the highest in the country, it reaches 62.4% of a week's income. It's the same underlying cost-of-living squeeze we've covered in our guide to why home insurance is becoming unaffordable in Australia, different drivers, but the same pattern of essential cover eating up a bigger share of ordinary household budgets.

🚗 What actually drives your premium🔗

The industry-wide trend explains why insurance costs more this year than last. What determines your specific quote is a different, more personal set of factors.

• Your vehicle. Make, model, age and repair cost profile all matter. A newer car loaded with driver-assist technology costs more to repair after an accident, some models are high-theft targets, and EVs and hybrids attract higher premiums on average, CHOICE data shows EV premiums rose 9% in the year to January 2026, against 5% for petrol cars.
• Your driving history and age. A clean claims record earns a no-claims bonus with most insurers. Younger drivers (under 25) and older drivers typically pay more, reflecting statistical claim rates, CHOICE found the 70+ age group saw the largest average premium increase of any age bracket in its latest analysis, up 7%.
• Your postcode. Location is one of the biggest rating factors. Postcodes with higher theft rates, accident rates or natural disaster exposure attract higher premiums, Victoria's theft surge is already showing up in state-level pricing, with the average Victorian comprehensive premium hitting $2,940 in 2025, the highest of any state.
• How you use the car. Annual kilometres, whether you're commuting or driving recreationally, and whether the car is garaged overnight all feed into the risk calculation.
• Your level of cover. Comprehensive costs more than third party options, a higher voluntary excess lowers the premium, and agreed value cover costs more than market value cover.

🛡️ The four types of car insurance cover in Australia🔗

Before you can compare quotes properly, it helps to know exactly what you're comparing. There are four distinct levels of motor-related cover in Australia, and they're not interchangeable.

CTP is mandatory and, in most states, bundled into your registration. In NSW it works differently, as a separate "green slip" market where you actually choose your own CTP provider. In Queensland, Victoria, South Australia and Western Australia it's managed through government or government-backed schemes. The critical point many drivers miss: CTP covers personal injury only. It does not cover damage to vehicles or property, so assuming your registration protects your car is a mistake that only becomes obvious after an accident.

Third party property damage is the entry-level voluntary option, it protects you financially if you damage someone else's car or property, but leaves your own vehicle completely unprotected. Worth considering for an older car where comprehensive cover would cost more than the car is worth. Third party fire and theft adds protection for your own car in exactly two scenarios, fire and theft, a middle ground for a car with some remaining value where you're comfortable self-insuring against collision damage.

🎯 The essential: Rule of thumb for older cars: if your car is worth $4,000 and comprehensive cover costs $1,800 a year, that's 45% of the car's value every single year just to insure it. At that ratio, third party fire and theft is usually the smarter call.

Comprehensive is the broadest cover and, for most drivers with a car worth more than a few thousand dollars, the standard choice, it pays for damage to your own car from accidents, theft, fire and weather events, regardless of fault.

✅ How to actually lower your premium🔗

None of this fixes the structural forces pushing premiums up industry-wide. But there's a lot of room between "accept whatever the renewal notice says" and "drop cover you actually need", and most of it comes down to a handful of habits.

Compare insurers every single year at renewal. This is the single most effective thing you can do. ASIC's August 2026 report (REP 838) found that none of the eight insurer brands it reviewed clearly explained the factors driving premium increases in their quotes or renewal documents, insurers simply aren't transparent about why your price went up, so loyalty doesn't pay. CHOICE data comparing quotes from January 2025 to January 2026 shows just how wide the gap gets, Bingle raised average new-policy prices by 25% while Kogan cut them by 31% over the same period, a spread of more than 55 percentage points for effectively the same risk. Separate research from Finder found a $1,871 difference between the cheapest and most expensive comprehensive policy for an identical driver profile. Set a calendar reminder two to three weeks before renewal and get at least three or four quotes.

Understand the excess lever. A higher voluntary excess reduces your premium. The trade-off is real, you pay less each year but more if you actually claim, so only push your excess up to an amount you could genuinely afford out of pocket at short notice.

It's the same logic as a household emergency fund, cash set aside specifically so an unexpected cost doesn't tip into a crisis.

Agreed value vs market value. Agreed value policies fix your payout amount at the start, so you know exactly what you'll receive if the car is written off, but they cost more upfront. Market value policies pay out the car's market value at the time of the claim, cheaper, but the payout can be lower than expected if used car prices move. Given used vehicle prices rose around 32% between 2019 and 2024, market value payouts have generally held up reasonably well in recent years, though that can change.

Pay annually, not monthly. ASIC found that paying by instalment can cost up to 20% more than paying the annual amount upfront, a meaningful premium on top of an already higher premium. If your cash flow allows it, paying annually is one of the simplest ways to cut your total cost.

Ask explicitly about discounts. Don't assume they're applied automatically. Ask directly whether you qualify for a no-claims bonus, a multi-policy discount for bundling car and home insurance, or a discount for garaging your car overnight. These are often available but rarely volunteered upfront.

Consider usage-based cover. Some Australian insurers now offer telematics-based or kilometre-based pricing. If you drive well below the average annual distance, this style of policy can deliver meaningful savings, worth asking about when comparing quotes.

Review your cover level as the car ages. As market value falls, reassess whether comprehensive cover still makes financial sense. If the gap between a comprehensive premium and a third party fire and theft premium is small but the car's value is low, switching down can free up meaningful cash each year without leaving you exposed to the risks that actually matter, fire and theft.

⚠️ What to do if something feels wrong🔗

If a quote or renewal seems unfair. The market is your primary check here. ASIC's REP 838 confirmed insurers are genuinely poor at explaining their rating factors, so don't expect a satisfying answer if you call and ask why your premium jumped. The more effective move is simply getting competing quotes and switching if you find better value.

If a claim is mishandled. Start with the insurer's internal dispute resolution (IDR) process, every Australian insurer is required to have one. Put your complaint in writing and keep a record of every communication. If IDR doesn't resolve things, you can escalate to the Australian Financial Complaints Authority (AFCA), free to use, independent, and its decisions are binding on the insurer. AFCA handles complaints about claim delays, claim denials and repair quality disputes, and in 2023-24 it received more than 10,000 complaints about comprehensive motor vehicle insurance alone, up sharply on the year before and enough to overtake home building cover as the single most complained-about insurance product in Australia. If you end up there, you're far from the only one. We'll cover the AFCA complaints process for motor insurance in more detail in a dedicated article, coming soon. In the meantime, our general guide to what to do when an insurance claim gets rejected walks through the IDR-then-AFCA process step by step.

❓ Frequently asked questions🔗