Who’d pay $3440 to insure my tiny car? My ex-insurer thought I would

Last week I had a nasty shock. When I opened up an email from NRMA Insurance, the quote for my new car insurance premium had a 3 in front of it. In fact, the cost of insuring my 2019 Kia Picanto, which is worth about as much as a Taylor Swift ticket, had gone up 17 per cent to $3440. How did that happen?

I know car insurance is expensive, especially when the policy covers a 21-year-old male driver. The tiny Kia was purchased in the mistaken belief that my son would not be seen dead in it. But if the cost of having a car keeps going up, I’d have to seriously consider getting rid of it and buying an e-bike. We live in the inner city, and after you add on petrol, tolls, servicing and parking, riding a bike and catching Ubers and taxis would be much cheaper.

The author’s Kia Picanto, for which NRMA Insurance’s proposed premium soared by 17 per cent to $3440.

The price rise hurt because I’d been a “loyal” NRMA customer for 22 years. Actually, I’d just been lazy. Unwilling to spend hours on the phone shopping around, I’d taken the easy way and just pressed “renew” each year. But now, enraged, I tapped my details into a few comparison websites to shop around.

This was the first hurdle. Unlike the sites for comparing energy, banking or telco prices, the car insurance websites don’t include the major brands. As consumer advocate Joel Gibson explained to me, that’s because they choose not to participate.

The home and car insurance market is very tightly held. The two largest companies, IAG and Suncorp, control about two-thirds of the market. Add in QBE and Allianz and the top four control well over 80 per cent. I should be able to plug in my details into one site and receive a range of quotes, but the Big Four won’t be part of it.

This increases their retention rates. Who has the time and the inclination to ring several companies and hang endlessly on the phone? Gibson told me that home and car insurance premiums are rising at an average of 16 per cent, which is the fastest rate of increase in 22 years. He has compared this with corporate earnings; at Suncorp (which owns AAMI, GIO and Apia), IAG (which owns NRMA, CGU, RACV and SGIO) and QBE, corporate profits are all up. In fact, IAG made a net profit of $832 million last year, up 140 per cent.

Gibson, the author of a money-saving book called Kill Bills, said insurance companies needed to be called out over “price walking”, the practice of charging older, loyal customers more each year without a major change in their cover, which results in them paying as much as 34 per cent more than new customers. The UK banned this in 2022.

I rang one of NRMA’s competitors, completed its questionnaire online and received a quote back for $1583. Then I called NRMA to see if it would match it. After talking me through the facts on young men and driving, the sales consultant declined to lower the quote but did offer me a $100 Woolworths gift card to stay. $100, after 22 years? Mate, if I was after that level of “loyalty”, I’d buy a cat.

I know there are sound reasons for the rise in car insurance. It’s affected by the same factors as home and contents insurance: extreme weather events linked to climate change. When a house is flooded or burnt, it usually includes a garage with a car (or two) in it, which have to be replaced.

In addition, we’re buying bigger, more expensive cars. Last year, seven out of the 10 best-selling cars in Australia were SUVs and utes. When any of those cars get involved in an accident, they do a lot of damage, often to the point where one or both cars need to be written off.

Margot Saville’s insurer pulled a swifty when the time came to renew her car insurance.Credit: Invision

And we’ve been having a lot of accidents; the national road toll in 2023 was 1253, the worst it’s been since 2018, for reasons which aren’t entirely clear to the experts. Even if cars only need repairs, modern cars are such complicated pieces of technology that they have to be pulled apart to fix small things.

Add to that supply chain issues exacerbated by the crisis in the Middle East and a shortage of motor mechanics, and you have a perfect storm of factors contributing to higher costs.

I checked my policy, noting that it covers the car being stolen, vandalised or damaged by someone trying to steal it. What self-respecting car thief would bother pilfering a Picanto? Actually, if some carjacker on training wheels bothered to take it, he’d probably be doing me a favour. I could actually get rid of a large part of my fixed cost base, lower my carbon footprint and be forced to get some exercise.

The best part of not owning a car, however, would be never having to enter the Valley of the Damned, otherwise known as the Rozelle Interchange. That, I wouldn’t miss.

Margot Saville is The Sydney Morning Herald’s deputy letters editor.

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