A few days ago, the renewal notice for our comprehensive car insurance arrived from RAC (WA) Insurance. The increase in premium was 17% over last year, which was in turn a 12% increase over the year before. I therefore emailed RAC Insurance as follows:
Since taking out comprehensive insurance 4 years ago, the insured value of our car has increased 5%, but the premiums have increased by 44%. Can you explain why?
I received a canned non-answer to which I replied:
Thank you for your email, but with respect, you have not addressed my question.
To rephrase it slightly: in the fours years we have been with RAC Insurance for our comprehensive insurance, the value insured has reduced by 10% (after inflation), while our premium has increased by 24% in real terms. The only factor that has changed are our ages (and that of our Outback). The Excess is unchanged, we remain members of the RAC, we have made no claims on our policy and car remains garaged (literally) in Ellenbrook.
Is this increase in premiums a function of our ages, has Ellenbrook become the wild west of car theft - or are we being subjected to a lazy tax?
I then received a response advising me to call them, and that “Your request can only be actioned verbally.” ie: they won’t put anything in writing.
It seems that house and contents insurance (see current Choice) isn’t the only insurance “product” suffering galloping inflation!
There really is no connection between the CPI and insurance. The latter is based on risk and profit margin.
The former is a measure of an increase of the cost of a group of goods and services month by month.
Is it just possible RAC are suggesting they are prepared to discuss your premium with you and offer a better deal? Not so expedient via email.
The “lazy tax” is often raised in Community discussions of insurance of all types. It costs nothing to call an alternate insurer and ask for a quote. Better two alternate insurers, even if they use the same underwriter. The RAC and many other brands market to loyalty. There is only one way to find out whether that loyalty is genuinely rewarded.
Many companies, including insurers, have departments or specialists known as ‘customer retention units’ or something similar. They have discretionary latitude the regular customer facing staff do not. It is all verbal until a ‘deal’ is struck. The reason for that is they do not want their negotiating margins to get circulated into the market as it will affect their credibility on the general market. If they put it in writing they expect it will be on forums within minutes and that would affect their overall margins depending on many many potential customers and existing customers see it. If a beneficiary circulates their all verbal experience it becomes anecdotal and the company has plausible deniability they made the offer, eg it does not carry the same weight.
That being common, a few years ago AAMI customer facing staff claimed they did not have such a unit but were able to negotiate themselves, and did. I am not aware if that remains the case.
And in some cases (any replacement policy) also costs. Costs do depend on inflation, so there may be a connection. It might be better to say that there are other significant reasons besides inflation that will increase insurance premiums.
While it is counter intuitive some older cars (at each renewal the car is a year older) cost more to repair than newer ones because of increasingly scarce parts or model specific higher claims histories, hence reflected in higher premiums.
Inflation is going to have a minimal impact. The big factors are:
- The rate and value of claims the insurer is experiencing. If the amount the insurer pays out goes up, the premiums have to as well. This can be exacerbated by an increase in cars that are expensive to repair, such as EVs (remember, if you hit one your insurance is liable).
- As already mentioned, as your vehicle gets older the cost of repairs may increase.
- Check the value your car is insured for. On rare occasions, this may stay stable or even increase despite the car getting older.
- The likelihood of other events such as theft and natural disaster may be changing.
What can you do about it? I know RAC WA typically doesn’t do ad hoc discounts, but you can still call and ask what would make your policy cheaper. You can shop around as different insurers will calculate all of the above differently. If you do find a cheaper policy, go through it with a fine tooth comb to make sure there isn’t a reason it’s cheaper (less inclusions, more exclusions).
I used to work in insurance. Happy to answer any other questions you may have.
Ring them and haggle. RAC is a “shrewd” business with which to deal.
I appreciate your comments - and I also wanted to share my experience so far so the Choice community members were aware of what’s happening.
I know setting insurance premiums is complicated, but we customers are also entitled to be informed as to why the real cost of insurance (it seems across the board) are skyrocketing.
I will make the call and see what they have to say. I just don’t want to.
Only 17%? AAMI has just hit me with a 22.7% for an eleven year old car. No circumstances have changed, no claims and the car is driven around 10,000 Km’s per year. I’m currently shopping around.
Welcome to the community @GNJones
There is some useful comment if reading the earlier posts in this topic.
For older motor vehicles, consider the cost of body repairs and parts is most likely increasing. A comment made by others. Even wreckers are expensive, assuming they have a supply and your vehicle is not a low volume model.
Looking around it may be worth asking for a comparison quote to only take up the minimum rather than comprehensive cover. Especially if the vehicle is not of any significant value. A policy can provide for a replacement (better for a newer vehicle?) or an agreed value. Is there a point where one is better of pocketing the savings and putting them towards the next car?
No claims no demerits no nothings. The AAMI renewal is up 27.6% for a 4 year old vehicle, 10,000km pa, drivers both seniors. After getting 4 comparison quotes the AAMI renewal is $100s under the others (so far) and $1,100 under Allianz (They clearly do not want Renault sedan business).
This is the first year in memory my renewal offer might be the best!
Most insurers also offer an inbetween ‘Third Party, Fire and Theft’ policy.
What’s usually included? (Check the PDS for specifics)
- Cover for your car in an instance of fire, theft or attempted theft.
- The insurer’s usual claims and repair service in the above situations.
- A hire car may be included for the above situations.
- Third party liability cover (varies by state as to the rules here)
- Limited cover if your car is hit by an uninsured driver
- A much cheaper price tag since they don’t have to fix your car in a fender bender, a common incident.
What’s usually excluded? (Check the PDS for specifics)
- Cover for your car in an accident, even if the other driver is at fault (you’ll have to go after their insurance)
- Cover for other weather events (such as flood or storm)
- Cover for glass unless it is an attempted theft of the whole vehicle
- Cover for your belongings inside the car
- Higher value cars. Many insurers will have a limit on the maximum value available on TPFT
General advise only, and does not consider your specific circumstances.
Thanks for your comments and advice.
This morning, I girded my loins and prepared to call RAC WA Insurance, but thought it worth checking with another insurer. I tried AAMI and after making their quote as close to the RAC coverage as I could, the difference was about $20.
It seems that our ages, the age of the car and general inflation in the car repair industry has caused our premium to shoot up. I have no illusions about the finance industry (even those notionally owned by members), but what can you do when you’re dealing with a cartel?
Anyway … thanks all.