Our fear of insurance costs is on the rise. Picture: iStock
Our fear of insurance costs is on the rise. Picture: iStock

Big money worry that’s only getting worse

Aussies have long been concerned by the rising cost of living and the hit to our bank accounts that comes with it.

But anxiety about one cost in particular is now on the rise - and it's only going to get worse.

Every two years, news.com.au runs its Cost of Living Survey to find out our readers' biggest household money worries. The results of the most recent survey are in, and news.com.au has kicked off the Money Project, revealing the biggest money challenges facing Australians and offering practical help on how to get your finances in shape for 2020.

The latest survey has revealed mortgage payments are the most intimidating future cost for respondents, followed by retirement and then insurance.

Back in 2017 retirement was the biggest future cost worrying Australians but it has now dropped below mortgage payments.

But concerns about insurance are on the rise up, with 30 per cent of respondents saying they are worried by the looming cost compared with 28 per cent in 2017, making it our third biggest financial headache.

Kids' school fees took out fourth place behind insurance, at 19 per cent, down from 27 per cent in 2017.

Childcare came next with 14 per cent, down from 18 per cent, and then supporting parents, HECS debt and other unnamed costs.

INSURANCE COSTS

Canstar's group executive and insurance expert Steve Mickenbecker told news.com.au people absolutely should fear the costs of insurance as they get older.

"Insurance becomes front of mind later in life especially the expensive ones," he said.

"Car insurance is a must-have when you get a car but others like house insurance, life insurance and health insurance are only thought of as people grow older."

In fact, car insurance was the second-most searched form of insurance on Google in Australia with 96,000 searches last year.

Travel insurance was number one with 138,000 searches while health insurance came in at 37,000.

Insurance specialist at Finder Sophie Walsh said it was unlikely that either car insurance or travel insurance was what truly intimidated Australians though.

"Travel insurance is such a popular insurance in terms of search volume because it's a one-off purchase," she said.

"Likewise, when it comes to your car insurance the older you get the cheaper your premiums become, as younger people are perceived as being riskier drivers."

Ms Walsh said health insurance was lower in search because people tended to remain loyal to their insurer, believing it was harder to switch.

"Aussies tend to stay loyal to their health fund, under the impression that it might earn them discounts or rewards but this is often not the case," she explained.

Data from Canstar shows older people, who have likely stuck with the same insurer for longer, pay more than others for their health insurance.

Canstar's data found Gen Z paid the least for health insurance at just $136.6 a month while Baby Boomers were paying on average of $263.2 a month.

These costs were only going to keep rising given the ageing population and the claims they would continue to make, Mr Mickenbecker said.

"Health insurance claims are massive in the industry and there is no question that they keep escalating ahead of inflation, and when claims increase so too do our premiums," he said.

In April these premiums are expected to rise by an average of 2.92 per cent under changes approved by health minister Greg Hunt.

This is the smallest increase in private health insurance premiums in two decades, and is part of a plan to encourage Australians to keep private health cover.

The industry may need more help than that though, as recent data confirmed that 46,969 people left their health insurer last year alone.

'DEATH SPIRAL'

Independent think tank the Grattan Institute has previously described private health insurance as being in the grip of a "death spiral" as Aussies abandon their policies in droves.

"Australia needs to confront a fundamental question: What is the purpose of private hospital care?" the institute said last year.

For many it seems there is no purpose, according to CHOICE health campaigner Dean Price, who said it was no surprise people were leaving.

"When you buy health insurance, you expect to be looked after when the worst happens, but our health insurance is letting us down with unexpected costs and unnecessary stress at the worst of times," he said.

Mr Price said with premiums rising within weeks, the government needed to do more if they wanted to stop people leaving health insurance.

"We just can't see the health insurance death spiral slowing," he said.

"CHOICE calls on the government to … review the whole system by undertaking a thorough public inquiry and commit to taking all necessary action to make sure people have access to fair healthcare."

Already industry regulator the Australian Prudential Regulation Authority (APRA) has warned the industry that it may have to step in.

Executive board member of APRA Geoff Summerhayes delivered a blunt message to the industry earlier this week.

APRA predicts that one in four insurers will collapse.
APRA predicts that one in four insurers will collapse.

"APRA predicts we're only a few years away from seeing private health insurers forced to merge or fold," he said.

Mr Mickenbecker said the idea that insurance was a waste of money if you don't claim was potentially a misguided one.

"There is a feeling that you only get the full benefit of insurance when something goes wrong and you make a claim," he said.

However he said insurance can give many people peace of mind and allow them to do things like borrow money to get a home loan, because even if something happens, you will be able to pay it back.

"You've had the biggest win if you don't claim because you've been able to get on with life but you've stayed in good health and wellbeing," he said.

HOW TO PAY LESS

Now is the time to shop for a better health insurance deal ahead of the April premium hike, Ms Walsh warned.

"This year, premiums will increase between 1.98 per cent and 5.63 per cent, and by shopping around, you can find a fund that offers better value," she said.

The cost of other forms of insurance such as home and contents were unlikely to rise annually and would only jump if there was a perceived risk.

However, a Senate report has found that premiums are rising due to natural disasters around Australia, Ms Walsh said.

"This summer has been rough for many Australians, from fires to floods, (and) it's likely we'll see an increase in premiums in the coming years," she said.

For Australians who are content with their insurer, Ms Walsh said even a simple phone call could make all the difference to your premiums.

"If you want to stay, call your provider and see if they are willing to match the cheapest premium you found," she said.

For everyone, it's best to go online and find a better deal as there are always cheaper options.

"Loyalty doesn't pay off, least of all with insurance," Ms Walsh said.

"Next time you receive a letter advising an increase in your premium, jump online and compare other brands."

 


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