'Angry' Aussie summer set to inflate car insurance premiums

The Insurance Council of Australia has flagged the possibility of increased motor vehicle insurance premiums in the coming months after an “angry summer” of bushfires, floods and hail storms.

Australia has endured a horrid run of natural disasters, headed by catastrophic bushfires that impacted much of the eastern seaboard from November – an event that created $1.9 billion worth of insurance claims alone.

In recent weeks, floods and damaging hail storms have added to the damage bill, leaving some customers disgruntled as insurers go about processing tens of thousands of motor vehicle claims, often in make-shift assessment centres.

Speaking with carsales.com.au after another violent hail storm in regional and metropolitan areas of NSW on Tuesday night, the Insurance Council of Australia’s Campbell Fuller said recent events had imposed short-term strain on insurers.

“We’ve seen an angry summer where tens of thousands of motor vehicles have been destroyed by bushfires, hail storms, floods and other storm activity. New South Wales, South Australia, Victoria, Queensland and ACT have been hardest hit,” he said.

“That has put short-term strain on the capacity of insurers to assess claims and provide the right guidance to customers. Insurers have pulled out all stops for customers, they’ve set up mass assessment centres to get through claims as quickly as possible. They’re handling hundreds of assessments a day.

“From there insurers can work out how to best help those customer, be it from repairing or replacing the vehicle depending on the policy that’s been purchased.”

As for whether motor vehicle insurance premiums were likely to change following recent natural disasters, Fuller said the frequency of those events definitely played a role.

“That will be up to each insurer. Normally a one-off natural disaster doesn’t really affect premiums too much,” he said.

“When you have an angry summer like the one we’re having at the moment, certainly insurers are looking closely at how to best to reduce the impact on customers in the short to medium term.

“Insurance premiums have been pretty stable for household insurance, contents and motor vehicles. Certainly the premiums have been significantly lower than the increase in utilities and health insurance. But there have been years where extensive natural disasters have caused billions in insurance claims have led to insurers reassessing premiums in some parts of Australia.”

Though recent weather events have affected large parts of the country, Fuller said the number of current motor vehicle claims was not unprecedented. He pointed to hail storms in Brisbane in 2014 which generated “well over 90,000 motor vehicles damaged or destroyed by hail”.

“Many of those were write-offs,” he said.

“There is concern in the industry about the long-term implication of natural disasters. We’re seeing them cause more damage in many parts of Australia. Unless governments are more willing to invest in measures that can decrease the effect of natural disasters then it’s likely there will be pressures increase premiums.”

While recent weather events had imposed strain on insurers and their network of repairers – some taking repairs out of area to lighten the load and waiting times – they have also sparked plenty of interest from car buyers looking to purchase a cheap set of wheels.

On that front, the Insurance Council urged prospective car buyers to be aware of the risks associated with purchasing a vehicle affected by hail damage. Fuller noted that many European vehicles involved more complex repairs on account of their unique welding techniques and hardware, such as radars and sensors.

“The rules around written-off vehicles differ between each state and territory, so buyers should first check on the state’s rules around hail damage,” Fuller said.

“As a general rule, a car that has hail damaged is unlikely to be able to obtain comprehensive insurance until it has been repaired to the expected standard.

“If it’s fixed, companies will generally insure it. If it’s not fixed they might offer a third-party policy.

“It is buyer beware and just because a seller makes an undertaking about the legal status of the car doesn’t mean it should be accepted by purchaser. The purchaser should take their own steps to verify a vehicle’s legal status and understand insurance implications.”