Premium Lather It's Your Shout
Sun Herald
Sunday August 5, 2001
Complaints about big insurance premium rises have sparked a consumer watchdog investigation. Debbie Anderson reports.
CONSUMERS deserve an explanation of why car and household insurance premiums have risen so significantly during the past few weeks, according to Federal Financial Services and Regulations Minister Joe Hockey.
He has called on the Australian Competition and Consumer Commission to question the rises in some premiums.
ACCC public relations director Lin Enright said the regulator was asking insurance companies to show reasons for any price rise.
Enright said: ``We'll look at it and report to the minister before mid-August, at the earliest."
The Australian Consumers Association fears the industry may be unfairly increasing premium costs in the wake of the collapse of HIH, the nation's second-largest insurer. HIH had more than 2 million policies issued, with more than 1 million policyholders, before the company collapsed in May.
Yet Hockey said the insurance industry had suggested the premium increases were linked to the 1999 Sydney hailstorms and extra capital requirements. ``I want to find out if this is true," he said.
Meantime, the ACA has received complaints from horrified insurance policyholders across NSW and Victoria. Premium increases by more than 30 per cent were common.
It was a 72pc increase for David Clarke, a customer with NRMA, Australia's largest general insurer.
Clarke told the ACA: ``This was despite having a 60pc no claim bonus and having my third party, house and contents insurance also with the NRMA.
``This is for a three-year-old car, I am 30 and have never made a claim. The best reason the NRMA insurance complaints hotline could give me was that my car was one year older than it was last year."
Another NRMA policyholder has reported a rise of more than $570, up from $1,245 to about $1,800.
The Penrith resident, also a rating-one driver entitled to a 60pc no claim bonus, said neither his car, a 1997 Holden Commodore VS Statesman, nor his circumstances had changed. ``And I know a few people in the same boat," he said.
Car insurance premiums are calculated to reflect the risk to which an insurer is exposed by insuring a particular type of customer and the vehicle they drive. However, the insurance companies claim several factors forced premiums up recently.
They include ``significant increases" in the frequency and cost of collision and theft claims, said NRMA products general manager Graeme Adams.
``Last year in NSW and ACT, professional theft accounted for more than 50pc of car theft insurance costs," Adams said.
``Car theft is a serious business in Australia, with the national theft bill running at $1billion. It's not just luxury vehicles such as BMWs, Audis and Mercedes that are targeted.
``Standard family sedans such as Holden Commodores are also extremely popular for thieves."
Adams cites external factors such as the falling Australian dollar's effect on imported spare parts pricing, higher reinsurance costs and government taxes.
Yet the Motor Traders Association, which represents more than 900 panel beaters in NSW, denies parts pricing has inflated premiums.
MTA chief executive officer Jim Gibbons said he ``can't see how the NRMA can keep a straight face".
Gibbons said: ``NRMA Insurance has gone to a great deal of trouble to ensure the cheapest parts are used. The major insurers will do anything they can to transfer the costs to anyone they can that includes repairers and policyholders.
``The insurers are sucking the marrow out of the bone of the repairs industry. We're talking about micro-businesses in no position to resist the demands of insurance companies."
CGU Insurance communications manager Chris Jackson said claims records showed the company's average claims costs had risen by about 20pc in recent years.
``If a customer's standard premium rises, this is due to our claims experience and increased claims costs associated with insuring customers with similar vehicles and characteristics," Jackson said.
AAMI's average comprehensive rates have risen by less than 3pc in the 11 months to the end of May, according to AAMI corporate affairs national director Ralph Johnston.
Like the NRMA, Johnston said an increase in the cost of parts could force some premiums up further as could a rise in burglaries in specific suburbs and a substantial rise in the rate of theft of specific vehicle models.
However, the ACA insists there's a silver lining in the cloud shopping around still reaps in savings.
ACA spokeswoman Jackie Lacey said: ``Whenever we conduct a survey of premiums we always find a big variation in the prices charged by different companies. In the current climate, with premiums going through the roof, it is even more important to shop around."
It worked for Miriam and Graham Tier, of Lane Cove. They wanted to add their newly licensed, 17-year-old daughter to the policy for Graham's 1998 Honda CR-V. To reinsure with the NRMA would have cost $2,817, ``nearly three times more than last year", Miriam Tier said.
``I rang the GIO and have saved us at least $588 a year. I think it's goodbye
for good to the NRMA from us," she said.
WHAT DRIVERS ARE PAYING 1997 HOLDEN STATESMAN v SEDAN Insurer NRMA Rating * 1 Was $1,245 Now $1,308 Claims Nil Changes Nil Result Switched to GIO, $1,034 Saving $574 1997 MITSUBISHI MIRAGE HATCH Insurer NRMA Rating * 1 Was $900 Now $1,200 Claims Nil Changes Nil Result Stayed with NRMA Saving Nil 1998 HONDA CR-4 4WD WAGON Insurer NRMA Rating * 1 Was $1,097 Now $2,817 Claims Nil Changes Added 17-year-old daughter to the policy Result Switched to GIO, $2,229 Saving $588 1996 HOLDEN BARINA SWING HATCH Insurer Suncorp Metway Rating * 1 Was $467 Now $1,073 Claims Nil Changes New address Result Switched to Allianz, $728 Saving $291 1994 MITSUBISHI MAGNA SE SEDAN Insurer AAMI Rating * 3 Was $516 Now $1,219 Claims Minor collision (headlight/bumper damage) Changes New address Result Switched to NRMA, $906 Saving $313 * Refer to no claim bonus discount to which policy-holder is entitled: Rating 1=60%, Rating 2=50%, Rating 3=40%, Rating 4=30%, Rating 5=20%, Rating 6=Nil
© 2001 Sun Herald
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