If you reckon Woolies and Coles, Energy Australia or AGL are the worst culprits on cost of living, think again. Prices expert Joel Gibson on the rapacious industry which has jacked up prices by 534%.
There’s a silent killer in Australian household budgets right now but it’s none of the bills that are getting all the attention.
While supermarkets and energy retailers hog the headlines, Industry X is quietly dishing out the biggest price hikes in 22 years, averaging around 15% and rising sometimes to over 50%.
Industry X is a duopoly with two businesses owning about 2 in 3 retail customers. Add in the 3rd and 4th largest market shareholders, and between them they have 84% of us on their books.
Here’s how 3 of the 4 biggest providers fared in recent results announcements:
- Provider A’s net profits in the relevant division were up 534% compared to 6 months ago. Prices were up 12-18%, depending on the product category.
- Provider B’s net profit was down because of a $304million asset write-down but on a like-for-like basis, profit was up 85% and cash earnings up 76% over 6 months. Prices were up 12.5%, “the strongest in nine years”.
- Provider C’s annual net profit in Australia and the region was up 131%. Prices were up 12.5% too.
If you know which Industry I’m writing about, you probably read the business news, because none of these results made page one.
It’s general insurance – home and car insurance mostly – and Providers A, B and C are Suncorp (home of AAMI, GIO, Apia), IAG (home to NRMA, CGU, SGIO & RACV) and QBE.
I’ve posted recently about the fact their profits are rising at the same time as their premiums and some of the stories I’ve heard in response would be hard to believe if I didn’t have the documents to prove them.
@joelmgibson This is gobsmacking. Credit to Michelle Bowes @News.com.au for spotting it. #moneysaving #costofliving #longervideos #insurance #aami #gio #suncorp
One car insurance customer was charged $545.55 by Bingle (part of Suncorp group) in 2022, only to be asked for $1225.38 upon renewal in December 2023. That’s a 125% increase despite no claims or changes to the cover.
Insurance premiums u. Bingle is Suncorp
A couple from St Helen’s Park, Sydney, had their home and contents insurance with Suncorp. In 2022 it was $1705. In 2023 it was $2975, a 74% increase. In 2024 it was $4064, a 36% increase. That would have been a 138% increase over two years with no major changes to the cover. When they complained, Suncorp reduced the quote to $3150, which was still $750 more than a competitor quote. They’re planning to switch.
General insurance premium rocket. Suncorp
Speaking of big stories that didn’t make it out of the business pages, the general insurance industry is also the subject of what I call “the biggest scandal you’ve probably never heard of”.
The biggest scandal you’ve never heard of
Last year ASIC fined NRMA a record $40 million for jacking up the base premiums of customers before applying so-called “loyalty discounts” so that they wouldn’t drop too far. It also took SGIO, SGIC and RACV to court for the same.
The watchdog also forced 11 insurers to refund $815 million in over-charged premiums to 5.6 million customers as a result of widespread pricing failures in the industry over the past decade or so.
While there’s a parliamentary inquiry now underway into the insurance industry, it’s focussed on whether they paid claims in a timely fashion after the catastrophic east coast floods of recent years. Pricing is a footnote and over-charging doesn’t rate a mention.
How do they get away with it?
I’ve been tracking the cost of living on a daily basis in Australia for 12 years and I’ve never understood why insurance companies are such a protected species. Their prices are a black box and they face very little scrutiny – two facts that may be connected.
While fuel retailers have to post their prices on 3-metre roadside signs and also now on government apps, supermarkets have to post unit prices on every shelf or website, and energy retailers must publish every publicly-available offer on a government website, insurance pricing is a private matter between customer and provider.
Because everyone’s premium rises on a different day of the year, there’s no spotlight in the way there is for health insurers (on April 1) or energy retailers (on July 1).
Too complicated, you wouldn’t understand, just pay
There isn’t even a comprehensive comparison website that carries most of the brands in the market because the big companies refuse to cooperate with comparison businesses, claiming insurance is too complicated to be compared on the basis of price.
Never mind that mobile and NBN plans, energy plans, credit cards and mortgages are all subject to comparison – insurance, they say, is different.
Never mind that some insurances ARE subjected to comparison on government websites, such as Compulsory Third Party insurance for NSW drivers, and that there’s been no downside for consumers.
“We’re different”
Regular car and home insurance are different, according to those who sell most of them and cannot be compared in the same way.
But maybe this year will be the year that the insurance industry is dragged kicking and screaming into the 21st century.
As Coles and Woolworths have learnt the hard way, you can only squeeze the lemon for so long before it leaves a bitter aftertaste. When customers cause a big enough fuss, reform becomes a vote-winner for populist politicians and you can find yourself fighting back a push for new red tape.
One of the fiercest critics of Coles and Woolies this year was former ACCC boss Allan Fels, in his price gouging report for the ACTU. While groceries got a lot of the headlines, Insurance was the 2nd most complained-about product in his review.
About a decade ago, Fels made enemies of the Big Insurance lobby in Australia when he was appointed as the NSW Emergency Services Levy Insurance Monitor, tasked with making sure insurance companies didn’t gouge customers when applying a tax to premiums.
Fels finds, falls
But Fels went off the reservation and started looking into insurance pricing, comparing 11 different brands and what they quoted for insurance on a hypothetical home and contents in various locations.
He found premiums sometimes differed by over $1000 and that the difference between prices for new customers and old loyal customers differed by an average of 25% and sometimes as much as 34%. The industry lobbied the state government for him to be removed from the post.
Maybe he was a man before his time. Now there are now multiple overseas examples of insurance pricing reforms that consumers, pollies and shit-stirrers like me can point to as evidence that there’s nothing inherently unique about insurance and it should be subject to the same price scrutiny as other industries.
Ban ‘price walking’
In the UK, for example, “price walking” has been banned since January 2022: car and home insurers cannot charge renewing customers more than they charge new customers.
In the months afterwards, renewal prices dropped but so did car insurance switching rates, down from 41% to 35%.
Finance guru Martin Lewis says the results were a mixed bag: “Some firms have simply boosted prices for all … The ‘same price for both’ rule is channel specific [so an online customer can still pay more than a phone customer] … [and] Many firms own more than one brand. They may aim to win new business via new brands, leaving existing brands at higher prices”. But it’s a start.
The next big opportunity for consumers will be the consumer data right, a new secure way to share your data with other providers and comparison services so they can help you shop around. It is due to be extended to insurance in 2024 or 2025, but the industry is already pushing back.
Insurance pricing reform is now happening in other (more) advanced economies because the cost of living has made it unstoppable. Why not here?
I’ve started a petition at change.org calling for Australian governments to stop insurance companies from over-charging Australians. You can sign it here.
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