Australian insurers have called for urgent and coordinated action to help address the systemic cost drivers behind rising motor premiums.
The 26-page "The Motor Insurance Policy Paper – A Roadmap for Reducing Rising Premiums" report released by the Insurance Council of Australia (ICA) in March 2025 shows that comprehensive motor insurance premiums are up 42% since 2019 (reaching an average of A$1,052 ($663) per year in 2024) as the input costs have soared.
The report says the rising expenses across the sector include claims cost, repair cost, vehicle replacement costs, rental car costs and rising fraud and claims expenses.
The report says credit hire companies provide replacement vehicles to not-at-fault drivers, then recover costs from the at-fault driver’s insurer – often at higher rates than typical rentals. Claims involving these providers have quadrupled since 2019 and are, on average, three times more expensive than standard claims, driving up costs and premiums for everyone.
Data from the Australian Prudential Regulation Authority indicate that underwriting profits for motor insurance lines are declining.
Insurers’ motor insurance costs as a proportion of premiums collected increased from 89% in June 2019 to 94% in June 2024, showing a decline in the profitability of this product as premiums have risen. To tackle the root causes of rising claims costs and deliver relief to consumers, the insurance industry advocates for coordinated action by state, territory, and federal governments.
The major reforms advocated include addressing labour shortages, strengthening motor industry supply chains and regulating accident towing and storage fees.
The ICA report suggests introducing and enforcing caps on excessive towing and storage charges across all jurisdictions. The ICA has also called for strengthening industry and law enforcement collaboration to detect and prosecute fraudulent insurance claims.
The Council has said that there should be stricter oversight of credit hire companies, such as through a mandatory code of conduct, to establish enforceable standards around disclosure and claims practices.
It said that without reform, these upward pressures on claims costs will continue, putting affordable and sustainable motor insurance at risk for Australian policyholders.
ICA CEO Andrew Hall said, “A 42% increase in premiums over five years reflects the costs that insurers are managing; but is unsustainable for Australian motorists.
“Insurers are doing their bit to reduce costs – such as streamlining operations, negotiating better repair arrangements, and investing in the repair workforce – but the reality is many cost drivers are outside the industry’s control. We need governments to step up with targeted reforms.”
He said, “The Insurance Council’s roadmap lays out practical steps that, if implemented, will remove inefficiencies and unfair costs in the system. We look forward to continuing our engagement with federal, state and territory leaders and encourage them to work with us on these solutions.”