Chris O'Keefe grills Insurance Council of Australia general manager over rising insurance costs 07:11

Matthew Jones is the General Manager of Public Affairs at the Insurance Council of Australia and he's on the line for us. Matthew, thank you for your time. No worries, Chris. So what's the underlying reason for the hikes in premiums? Well, unfortunately, wherever you live in Australia, whether you're exposed to extreme weather risk or not, premiums are rising because of the escalating cost of extreme weather. We had, you know, three years of very bad extreme weather events following the Black Summer bushfires.

The growing value of our assets means that when we replace them, it's going to cost more. Inflation, which you mentioned, but particularly inflation in the building and motor repair trades is running and has run higher than inflation generally. And then there's insurers' cost of doing business. So the reinsurance that insurers buy to spread the risk around the world has gone up quite substantially over the last 12 or 18 months. For what reason?

Well, reinsurers are looking at Australia and they're repricing the risk. Australia, not to get too technical about it, but Australia used to be a good hedge against things like earthquake in Japan and hurricane in Florida. And because of the number of extreme weather events that we've had since 2019-2020,

through to 2023, reinsurers repriced that risk. I mean, there are also kind of global factors happening in the insurance market which impact us here. We're not immune. Insurance is a global business. But the good news is that some of these pressures are coming off.

And so some of the very significant price rises that you mentioned at the top of the segment, we expect to see moderate over the coming period. They'll moderate, but they won't go backwards, will they? And premiums won't get cheaper.

Premiums have gone down historically at other times when the market has softened. We're not predicting that they will go down, but it has happened in the past. So the good news is they'll just stay high. They won't come back down. Well, unfortunately, this is the world we live in now with more extreme weather events. Everything costs more. And, you know, anyone who's done a renovation or a build knows that what might have cost $200,000 or $300,000 five or ten years ago is now, you know, double that.

Understood. If we're in a situation, there's an inflection point with everything, isn't there? You've seen it with cigarettes. I don't know. This is a...

Might sound like a strange analogy, but you've seen it with cigarettes in the fact that things have gone up in terms of the tax on cigarettes so significantly. People have either, one, given them up, or two, gone to an illegal product. Do you think when it comes to insurance, there will be an inflection point where you guys just price people out of buying it, thus cutting your nose off to spite your face?

Well, that's something that obviously insurers don't want to see and insurers are actually doing. But what do you expect if you're looking at 60% to 70% increases, 100% increases in one instance? Well, what we recommend is that people, when they do get those big increases, and it's usually on a renewal notice, that they shop around. And we generally find that people can find a much cheaper premium, a premium that works better for their needs,

if they shop around. Not every insurer will offer the same premium at the same price, so it's really important that people don't just renew, but that they look at what other options are available. There are also other things that they can do, like list the excess. So, you know, excesses on Australian home and contents

Products are generally set reasonably low, kind of around $1,000, but you can lift it up to as high as $5,000 for most insurers just in an online application, and that will substantially reduce your premium cost. I just want to pick you some – you get these increases likely on renewal notices. I find that a little bit underhanded.

that the insurance companies go, okay, you can renew exactly the same structure. We've already got your business, but we're going to charge you four grand more just because we can. No conversation about it. They just send it in the bill, send the bill in the mail. Do you think that's a good way to do business, Matthew?

Well, I think that there are... You know, there's communication that insurers include on their renewal notices, which they're obliged to set out why the... You know, what are the reasons for the increase that people are getting. But that don't ring them, do they? No, no, no. But, you know, all...

that people can always pick up the phone and talk to their insurer about it. And we also often find that when people do talk to their insurer and maybe give the insurer a bit more information, that the insurer is able to recalibrate the price. So shop around, talk to your insurer. You know, we've got to be active participants in this process.

Yeah, we do. The consumer. And what I do think is interesting here is that we, the consumer, are the ones who are fighting against insurance companies delaying and denying tactics. And when you do have to claim something, unfortunately, your members make it nigh impossible to deal with them.

Well, you know, we do see in the media examples of people who've had poor claims experience. Matthew, have you ever had to claim something on an insurance? I have. I have, and I had a good claims experience. And I would say this, Chris, as well, that in the research that we do and that our members do, the people who have the most positive view of insurance are those who've had a claim. You know, for 99% of people, their claim experience is a good one.

and they get what they expect and it's resolved, you know, within the timeframe. 99% of people. How do you quantify that? Well, I'm being serious here because I know you're being rhetorical, but if you're going to throw numbers at me like that because that's not true, and I'll just read you this. So this is somebody who was damaged in the 2022 flood on the Northern Rivers. Her quote is, I'd rather deal with Satan than my insurance company.

Well, we know that there were some poor claims experiences after the 2020... You said 99% have had a good experience. That's why the insurance industry engaged Deloitte to have a look at how we performed and we came up with a number of recommendations which we're currently implementing. We've participated in the parliamentary inquiry which is currently underway. Insurers, you know, apologise to people like the person that you... And I am aware of that quote.

They apologise to customers where they were let down. And we're going forward doing better. Yeah, by charging people 100% more. Well, as I said, shop around, talk to your insurer. You can understand why people are jack of it, right?

Well, of course I can understand that when people get a renewal notice and it is very significant and they don't understand why, that can be annoying. But what we encourage by coming on programs like yours and talking about it is for people to shop around, talk to their insurer. There are other options. They don't just need to renew from the notice that they get from their insurer. Shop around. Don't speak to Satan. Go around the corner and speak to Lucifer instead. Matthew Jones, I appreciate your time.

Thanks, Chris. That's Matthew Jones, General Manager of Public Affairs at the Insurance Council of Australia.