Drivers slugged when renewing insurance
AUSSIE drivers are copping a lazy tax on car insurance, with new research showing the majority renew with the same insurer each year, despite knowing premiums have been hiked.
A Comparethemarket.com.au survey of 1000 comprehensive car insurance policy holders found a whopping 89 per cent renewed with the same insurer as last year, while 39 per cent had been loyal for five years.
But loyalty can be costly in the insurance game, noted Comparethemarket.com.au spokeswoman Abigail Koch.
"If you've been with an insurer for two years plus, there is typically a better deal out there," Ms Koch said.
The main reason respondents chose not to switch insurers was that they did not believe they would find a cheaper policy elsewhere.
The hassle of switching proved too great a deterrent, even though 81 per cent of respondents knew their premiums increased annually.
"(The figures) were about convenience and it's hard for people to appreciate the cost difference," Ms Koch said. "But you've got to question why you're paying more each year when your car is worth less."
Annual premiums would need to be hiked more than 10 per cent in order to prompt a switch from nearly half of those who had stayed loyal, while another third said they would not switch unless slugged at least 15 per cent.
People sometimes find out the hard way their insurance policy is unsuitable.
"Anecdotally, a lot of the people who come to a comparison site like ours have had a poor experience with a claim," Ms Koch said.
"We always recommend people read through the product disclosure statement (PDS) and look at add-ons like windshield cover and access to a hire car … they typically push up the cost of the premium but sometimes it's about having the option."
She also recommended checking cover on personal items inside the car, as the loss or damage of an expensive pram, baby seat or even pair of sunglasses can cancel out savings made from a cheaper policy.
Worryingly, a separate Finder.com.au survey of 1800 Australian drivers found 41 per cent did not read the PDS before signing up to a policy, which may put them at financial risk, said Finder.com.au insights manager Graham Cooke.
"Unfortunately, with insurance it's easy to fall into a set and forget mindset, which is why we see Aussies sticking with their insurers for nearly five years at a time," Mr Cooke said. "Underinsurance and junk policies exist because of the people who take out cover for the peace of mind but who have no real understanding of what they're covered for."
Being underinsured can lead to a major shock and cost burden if an accident happens.
"Insurance should be viewed as an asset and a safety net and not a necessary evil," Mr Cooke said. "However, even if drivers are taking out a low level of insurance for the peace of mind, that's better than having no cover at all."