Motor Insurance

in Australia includes both private/domestic and commercial motor insurance

Domestic motor insurance 

in Australia, commonly known as Car Insurance, is a highly competitive market offering various levels of coverage to protect vehicle owners from financial loss due to accidents, theft, or damage.

Types of Coverage

In Australia, there are four main types of domestic motor insurance:

1. Compulsory Third Party (CTP) Insurance:
   • Coverage: This is the only mandatory car insurance in Australia. It covers personal injury or death to other people (drivers, passengers, pedestrians) if you or someone driving your car causes an accident. It covers their medical expenses, rehabilitation, and lost income.
   • What it DOESN’T cover: Damage to your car, damage to other people’s property (cars, fences, etc.).
   • How it’s purchased: In most states and territories (WA, SA, TAS, NT, ACT, VIC), CTP is included as part of your vehicle registration fee. In NSW and QLD, you choose your CTP insurer (known as a “Green Slip” in NSW) separately before you register your vehicle.
2. Third Party Property Damage (TPPD) Insurance:
   • Coverage: Covers the cost of damage your car causes to another person’s property (e.g., their car, fence, building) if you are at fault in an accident. It also typically covers your legal costs arising from such claims.
   • What it DOESN’T cover: Damage to your own car.
   • Purpose: This is a basic, affordable option if you want to protect yourself from potentially large repair bills for someone else’s property, but are willing to cover the cost of repairing your own car.
3. Third Party Fire & Theft (TPF&T) Insurance:
   • Coverage: This is an upgraded version of TPPD. It covers damage you cause to other people’s property (like TPPD) PLUS covers your own car if it is stolen or damaged by fire.
   • What it DOESN’T cover: Accidental damage to your own car (e.g., if you hit a pole or are at fault in a collision and your car is damaged, that’s not covered unless it’s due to fire or theft).
4. Comprehensive Car Insurance:
   • Coverage: This is the highest and most extensive level of cover. It includes everything covered by TPF&T, plus: 
     • Damage to your own car: Regardless of who is at fault in an accident, or if your car is damaged by events like storms, hail, flood, vandalism, or impact.
     • Legal Liability: Covers your legal liability for accidental injury to others or damage to their property (often up to $20 million).
     • Additional Benefits (commonly included or optional): 
       • New for Old Replacement: For new cars written off within a certain period (e.g., 2 years from manufacture), the insurer may replace it with a new car of the same make/model.
       • Hire Car after Not-at-Fault Accident: Provides a rental car if your vehicle is damaged in an accident that wasn’t your fault and the other driver’s details are provided.
       • Towing Costs: Covers reasonable costs for towing your car after an insured event.
       • Emergency Accommodation and Travel: If you’re far from home.
       • Personal Property: Limited cover for personal belongings damaged or stolen from your car.
       • Roadside Assistance: Often an optional add-on.
       • Choice of Repairer: Some policies allow you to choose your own repairer, while others require you to use their approved network.

Market Value vs. Agreed Value (for Comprehensive Policies):

• Market Value: The amount your car would realistically sell for in the open market just before it was stolen or damaged beyond repair, considering its age, condition, kilometres, and accessories. This value depreciates over time, so your payout might be less than expected.
• Agreed Value: A fixed amount that you and your insurer agree upon to insure your car for the policy period. This provides certainty as you know exactly how much you’ll receive if your car is written off, but typically results in higher premiums.

Average Premiums

Average comprehensive motor vehicle insurance premiums in Australia have been increasing significantly.

According to recent data (CarExpert, based on ICA figures up to 2024):

• The average cost of a comprehensive motor vehicle insurance policy has risen by 42.4% since 2019, reaching a peak of $1,052 in 2024.
• This figure is an average across all states and policy types.

Average Gross Comprehensive Motor Vehicle Insurance Premium by State (June 2024 data):

• New South Wales: $1,176
• Victoria: $1,125
• Queensland: $955
• Western Australia: $899
• South Australia: $894
• Tasmania: $757
• Australian Capital Territory: $1,108
• Northern Territory: $1,154

Factors Influencing Your Individual Premium:

• Type of Coverage: Comprehensive is the most expensive, followed by TPF&T, then TPPD. CTP is a separate cost.
• Driver Details: 
  • Age: Younger drivers (under 25) typically pay significantly more due to higher statistical risk.
  • Driving History: Accident history, traffic infringements, and demerit points will increase premiums.
  • Gender: Historically, male drivers pay more than female drivers, particularly in younger age brackets.
  • Named Drivers: Premiums may be lower if only specific drivers are listed, rather than “any driver.”
• Vehicle Details: 
  • Make, Model, Year: The cost of the car, its performance (sports cars are more expensive to insure), safety features, theft rate, and cost/availability of parts.
  • Modifications: Aftermarket modifications can increase premiums or even lead to refusal of cover.
  • Value: Higher value cars (either market or agreed) will cost more to insure.
• Usage: 
  • Private vs. Business Use: Cars used for business (e.g., sales, deliveries) generally have higher premiums. Ride-sharing is usually excluded from standard policies and requires specialized commercial cover.
  • Annual Kilometres: Higher kilometres driven often mean higher risk. Some insurers offer “low-km” policies.
• Location: 
  • Parking Location: Where your car is usually parked overnight (e.g., locked garage vs. street parking) significantly impacts theft risk.
  • Postcode: Areas with higher theft rates, accident rates, or extreme weather events (e.g., hail-prone regions) will have higher premiums.
• Excess: Choosing a higher excess (the amount you pay out-of-pocket for a claim) will reduce your premium, and vice-versa.
• No Claim Bonus (NCB)/Rating: A discount offered for not making claims over a period. A higher rating (e.g., Rating 1) means a greater discount.

Trends in the Australian Domestic Motor Insurance Market

1. Surging Premiums: The most prominent trend is the significant increase in premiums.
   • Rising Claims Costs: This is the primary driver. The average claim size has increased by 42.2% between 2019 and 2024, outstripping inflation.
   • Increased Repair Costs: Due to: 
     • Complexity of Modern Vehicles: Advanced safety features (sensors, cameras, ADAS) are expensive to repair and recalibrate.
     • Parts & Labour Shortages: Supply chain issues and a scarcity of skilled mechanics contribute to higher costs and longer repair times. Repair bills now make up ~60% of claim costs.
   • Higher Vehicle Replacement Costs: Prices for new and used cars have risen substantially since 2019, directly impacting payouts for written-off vehicles.
   • Natural Disasters: While house and contents insurance is more directly impacted, severe weather events (hailstorms, floods) also cause significant damage to vehicles, adding to overall claims costs.
   • Credit Hire Claims: An increase in claims for replacement rental cars, which can be costly.
   • Fraud: Rising instances of insurance fraud.
2. Usage-Based Insurance (UBI) / Pay-As-You-Drive (PAYD):
   • Growing interest in models where premiums are based on how much you drive (telematics based on kilometres) or how safely you drive (monitoring braking, acceleration, speed).
   • This offers more personalized pricing and appeals to low-mileage drivers or those with excellent driving habits.
3. Electric Vehicles (EVs) and Hybrid Vehicles (HEVs):
   • As EVs become more common, insurers are developing bespoke policies. While cheaper to run, EVs often have unique risk profiles and higher repair costs (e.g., battery replacement), influencing premiums.
4. Digital Transformation and AI Integration:
   • Insurers are increasingly using AI and data analytics for more efficient claims processing, personalized pricing, and improved customer service through chatbots and online platforms.
5. Data-Driven Pricing:
   • Insurers are leveraging vast amounts of data to assess individual risk more accurately, leading to highly granular pricing that considers numerous factors beyond traditional demographics.
6. Focus on Customer Experience and Retention:
   • In a competitive market with rising premiums, insurers are focusing on improving customer service, claims handling efficiency, and offering loyalty programs to retain policyholders.
7. Underinsurance and Affordability:
   • With premiums increasing, there’s a risk that some motorists may opt for lower levels of cover or forgo optional insurance altogether, potentially leading to financial hardship in the event of an accident.

It’s crucial for Australian motorists to compare quotes from multiple insurers, understand the Product Disclosure Statement (PDS) for any policy they consider, and ensure their chosen coverage adequately meets their needs and financial situation.

Commercial Motor Insurance 

in Australia is a vital business protection for any enterprise that uses vehicles for commercial purposes. Unlike domestic car insurance, which covers personal use, commercial policies are specifically tailored to the unique risks associated with business operations.

Types of Coverage

Commercial Motor Insurance offers various levels of coverage, similar to domestic policies, but with important distinctions for business use:

1. Compulsory Third Party (CTP) Insurance:
   • Mandatory: Just like for private vehicles, CTP is compulsory for commercial vehicles. It covers the cost of personal injury or death to other people (drivers, passengers, pedestrians) if your commercial vehicle causes an accident.
   • Purchase: Included with registration in most states/territories, or purchased separately (Green Slip in NSW, specific insurer in QLD).
2. Third Party Property Damage (TPPD):
   • Coverage: Covers damage your commercial vehicle causes to another person’s property (e.g., their vehicle, business premises, infrastructure) if you are at fault.
   • Purpose: Essential for businesses to protect against substantial third-party property damage claims.
3. Third Party Fire & Theft (TPF&T):
   • Coverage: Extends TPPD to include cover for your commercial vehicle if it is stolen or damaged by fire.
   • Purpose: A step up for businesses needing protection against major loss of their own vehicle due to fire or theft, but not accidental damage.
4. Comprehensive Commercial Motor Insurance:
   • Coverage: The broadest form of cover. It includes everything covered by TPF&T, plus: 
     • Damage to your own commercial vehicle: Covers accidental damage to your vehicle, regardless of fault, as well as damage from events like storms, hail, flood, vandalism, or impact.
     • Legal Liability: Covers your legal liability for accidental injury to others or damage to their property (often with higher limits than domestic policies, e.g., up to $30 million or $50 million). Some policies specifically address liability arising from the dispersal of pollutants.
     • Vehicle Types: Can cover a wide range of commercial vehicles, including sedans, utes, vans, trucks (light to heavy, including prime movers), forklifts, bobcats, mini-loaders, trailers, and other mobile machinery.
     • Additional Benefits (commonly included or optional): 
       • New Vehicle Replacement: For new commercial vehicles written off within a specified period (e.g., 1 or 2 years from registration), the insurer may replace it with a new one of the same make/model.
       • Hire Costs after Fire or Theft: Covers the cost of a rental vehicle to keep your business operational while your vehicle is repaired or replaced.
       • Emergency Vehicle Hire/Temporary Replacement: For short-term needs after an accident.
       • Personal Property: Limited cover for personal belongings damaged or stolen from the commercial vehicle.
       • Signwriting/Accessories: Cover for damage to business signwriting or specialised equipment/accessories fitted to the vehicle (e.g., toolboxes, racks, built-in multimedia).
       • Damage by Uninsured Motorists: Cover for damage to your vehicle if an uninsured third party is at fault (often with a sub-limit).
       • Emergency Repairs and Towing: Covers immediate costs to secure and move the vehicle after an incident.
       • Lifetime Guarantee for Repairs: If the insurer authorises repairs, they may guarantee the workmanship for the life of the vehicle.
       • Broadening of Cover: Specific extensions for things like incorrect fuel, lost or damaged keys, or a temporary replacement vehicle.
       • Finance Gap Protection: In case of total loss, covers the difference between the insurance payout and any outstanding finance amount (often an optional extra).
       • Downtime Coverage / Loss of Income: For income-generating vehicles (e.g., taxis, delivery vans) that are off the road due to an insured event (often a crucial add-on for transport businesses).

Key Difference from Domestic:

• Business Use: Explicitly covers the vehicle for business activities (e.g., transporting goods, visiting clients, deliveries, tradie work, sales calls).
• Specialised Vehicles: Covers a much broader range of vehicles than personal car insurance.
• Fleet Options: Businesses with multiple vehicles can often take out a “Motor Fleet” policy, which covers all vehicles under a single policy, streamlining administration and potentially offering better rates.
• Higher Liability Limits: Reflects the greater potential for damage or injury in commercial operations.

Average Premiums

Providing an “average” premium for commercial motor insurance is even more challenging than for domestic car insurance due to the vast diversity of commercial vehicles, their uses, and the businesses that operate them. Premiums can range from a few hundred dollars to tens of thousands per year, or even more for large fleets or specialized heavy vehicles.

However, some general benchmarks:

• Standard Commercial Trucks: Premiums can start from around $2,500 per year, but this is highly variable.
• Small Commercial Vehicles (utes, vans for trades/services): Might be in the range of $1,000 – $5,000+ per year, depending on the vehicle’s value, industry risk, and claims history.
• Heavy Vehicles (prime movers, earthmoving equipment): Premiums can easily run into $10,000 – $50,000+ per year per vehicle, especially if carrying dangerous goods or operating in high-risk environments.
• Fleets: Pricing for fleets is highly individualised, often based on the fleet’s collective claims history, the mix of vehicles, and specific business operations. Insurers might offer aggregate limits and tailored packages.

Major Factors Influencing Commercial Motor Premiums:

• Type of Vehicle: Heavy trucks, earthmoving equipment, and vehicles carrying dangerous goods will have significantly higher premiums than light commercial vans or sedans.
• Vehicle Value: The sum insured (market or agreed value) for each vehicle directly impacts the premium.
• Industry and Use: 
  • High-risk industries: Construction, mining, long-haul transport, waste management, and industries carrying hazardous materials will pay more.
  • Frequency of use: Vehicles on the road constantly (e.g., delivery drivers) have higher exposure.
  • Specific operations: E.g., hot shot deliveries, logging, crane operations.
• Radius of Operation: Vehicles operating interstate, in remote areas, or in specific high-risk zones will incur higher premiums than those used locally.
• Driver Demographics & History: Age, experience, driving records (accidents, infringements) of all nominated drivers. For fleets, the overall claims history of the fleet is paramount.
• Claims History: A poor claims history, particularly for major accidents, will lead to substantial premium increases.
• Safety Management: Businesses with robust safety management systems, driver training programs, and telematics (driver monitoring) may receive discounts.
• Parking/Garaging: Secure overnight parking (e.g., locked depot vs. street) reduces theft risk.
• Excess (Deductible): Opting for a higher excess can reduce the premium.
• Optional Extras: Adding specific benefits like downtime cover or higher liability limits increases costs.

Trends in Australian Commercial Motor Insurance

1. Rising Premiums and Claims Costs: Mirroring domestic motor insurance, commercial premiums are increasing due to:
   • Higher repair costs: More complex vehicle technology (ADAS, electronics) and escalating costs of parts and labour.
   • Increased vehicle values: Higher cost of new and used commercial vehicles.
   • Supply chain disruptions: Leading to longer repair times and higher costs for parts.
   • Severity of claims: Commercial vehicle accidents often involve greater damage and higher third-party liability claims.
2. Focus on Fleet Risk Management:
   • Insurers are increasingly emphasizing proactive risk management for commercial fleets.
   • Telematics and GPS Tracking: Data from these systems (driver behaviour, location, speed, harsh braking) is being used for underwriting, pricing, and encouraging safer driving, potentially leading to premium discounts for well-managed fleets.
   • Driver Training and Safety Programs: Businesses with documented safety protocols and ongoing driver training are viewed more favourably.
3. Complexity of Vehicle Technology:
   • The proliferation of advanced driver-assistance systems (ADAS), electric vehicles (EVs), and connected vehicle technology in commercial fleets introduces new repair complexities and potentially higher costs.
   • Insurers are adapting policies and underwriting models to account for these technological shifts.
4. Supply Chain Pressures:
   • The ongoing global supply chain challenges continue to impact the availability of replacement parts and new vehicles, leading to extended repair times and higher business interruption losses.
5. Underwriting Discipline:
   • Following several years of challenging profitability, insurers are applying stricter underwriting criteria, particularly for high-risk segments or fleets with adverse claims histories.
6. Demand for Specialised Cover:
   • Businesses are increasingly seeking highly tailored policies that address their specific operational risks, such as: 
     • Goods in Transit Insurance: Often purchased alongside commercial motor, covering the cargo being transported.
     • Contingent Liability: For specific contractual obligations.
     • Downtime/Loss of Use: Crucial for businesses reliant on their vehicles for income generation.
7. Consolidation and Capacity:
   • The market sees ongoing adjustments in insurer capacity and appetite for certain risks, potentially leading to fewer options for very high-risk or specialized commercial motor fleets.

Engaging an experienced insurance broker is highly recommended for commercial motor insurance. A broker can help businesses:

• Identify their specific risks and vehicle types.
• Navigate the complexities of policy wordings and exclusions.
• Tailor a policy or fleet program with appropriate limits and benefits.
• Negotiate premiums with various insurers to secure competitive terms.
• Assist with claims management.