If you have recently received your car insurance renewal notice and felt a twinge of concern, you are not alone.
Many Australian drivers are facing significant increases in their car insurance premiums.
But which state is bearing the brunt of these hikes, and what can you do to keep your costs under control?
Car insurance premiums outpacing inflation
While the cost of living has been a constant topic of conversation, car insurance costs have quietly risen even faster than headline inflation.
According to a recent Canstar analysis of 67,000 quotes across 43 providers, the average car insurance premium has increased by 5.8 per cent this year—more than double the current inflation rate of 2.4 per cent.
For the average Australian motorist, this equates to an extra $122 a year, with the typical annual premium now sitting at $2,226.
Victoria: The unlucky winner
If you are a Victorian driver, prepare for a significant increase. Victoria has recorded the steepest rise, with premiums climbing by 8.3 per cent—that is an extra $225 a year.
The average annual premium in Victoria now stands at a substantial $2,940, making it the most expensive state for car insurance in the country.
New South Wales (NSW) is close behind, with drivers paying an average of $2,570 after a 5.8 per cent ($140) increase.
The Northern Territory completes the top three at $2,283, followed by Western Australia (WA) ($2,032), Queensland ($2,010), South Australia ($1,970), and Tasmania ($1,785).
Who’s paying the most? Age and gender matter
It is not only where you live that affects your premium—your age and gender are important factors as well.
Drivers over 50, who tend to be safer on the roads statistically, still experienced a 6.5 per cent increase, with their average premium rising by $77 to $1,260.
Young drivers, however, are facing the steepest rises. Men under 25 pay the highest average premium at $3,020, after a 5.7 per cent ($162) increase.
Young women are not far behind, with a 6.1 per cent ($156) rise, bringing their average premium to $2,706.
Why are premiums rising?
What is driving these persistent increases? According to Canstar’s data insights director, Sally Tindall, it is a combination of factors.
Natural disasters, such as the recent floods on the NSW mid-north coast, have caused a surge in claims, leading insurers to raise premiums to recover losses.
‘Big claim events always add to the cost of insurance,’ Ms Tindall explains.
Although this year’s increases are more moderate than the sharp 30.5 per cent spike seen in 2024, they continue to strain already stretched household budgets.
‘There are still rises on top of rises, which makes it incredibly difficult for people who are cash-strapped to pay their premiums when those notices come through,’ Ms Tindall says.
Can you lower your premium?
The good news is there are ways to reduce your premiums. One innovative option is telematics insurance, offered by providers like ROLLiN Insurance.
If you are a safe driver, you can install an app on your smartphone that monitors your driving habits—such as braking, acceleration and even how often you touch your phone.
If you score well, you could save up to 15 per cent on your premium. This is especially beneficial for high-risk drivers who may feel unfairly penalised.
However, the simplest and often most effective way to save is to shop around.
Canstar’s research shows that switching to one of the cheapest providers (such as ROLLiN Insurance, Bingle, Budget Direct, ING or Virgin Money) could save you an average of $692 a year.
If you have been loyal to your insurer for many years, switching could bring even more savings.
What should you look for?
While price is important, do not simply go for the cheapest policy. Make sure you get value for money—a reasonable level of cover at a competitive price.
Read the product disclosure statement carefully, check for exclusions and consider what extras you actually need.
Have your say
As insurance costs continue to climb, many motorists are left weighing up their options while trying to stay on top of everyday expenses.
While the latest rise may not be as steep as previous years, it still adds pressure to household budgets already feeling the pinch from other cost-of-living increases.
Have you noticed a jump in your car insurance premium this year? Are you thinking about switching providers or have you found ways to keep your premiums down? What steps have you taken—if any—to reduce your costs or review your cover? Share your experiences and tips in the comments below—your advice could help fellow readers save hundreds.
Also read: Supermarket car insurance sounds smart, but is it really a good deal?
