Rival insurers have been charging premiums that differ by as much as $10,000 a year on the same properties – in what observers say should be a warning to homeowners to shop around.
Analysis by Compare the Market showed a marked divergence across different insurers in how they assessed risk on the same houses. The result was radical variances in charges for the same addresses.
It comes as additional research showed the annual costs of home and contents insurance rose by more than $160 over the past six months in every major capital bar Perth.
Melbourne premiums rose by nearly $200 a year over the six-month period, while Sydney premiums rose an average of about $175 to hit $3210 a year – the priciest in the country.
Compare the Market economic director and former Sunrise host David Koch chalked up the increase in charges to insurers trying to recoup the cost of losses from extreme weather events like ex-tropical cyclone Alfred.
Mr Koch added that the discrepancies in costs between insurance providers were arising because insurers often used different records to determine each address’ risk profile.
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Compare the Market economic director David Koch said insurers were upping charges to recoup the cost of natural disasters.
Individual properties in Sydney’s inner south west were attracting insurance price differences as large as $10,000, while in parts of Melbourne and Brisbane the differences were as wide as $3000 a year.
“It is weird and annoying that different companies can charge different premiums for the same item being insured,” he said.
“Insurance underwriters rate risk differently and they have their own preferences based on the history of claims made before by people that live in your area with similar characteristics.”
Finder.com.au insurance expert Peta Taylor said the differences in premiums for the same properties were substantial and meant those who did not shop around could face heavy unnecessary costs.
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Home and contents insurance costs were the highest in Sydney.
“We’ve seen price differences in the thousands for the exact same home, in the exact same suburb. That’s not pocket change — it’s potentially your holiday budget, or your groceries for a month,” Ms Taylor said.
“Every insurer calculates risk differently, and their models are proprietary. What we do know is that risk pricing usually includes a mix of environmental exposure, crime rates, the cost of materials and labour to rebuild, and other property-specific factors.”
The actions of neighbours could have a strong influence on local premiums, Mr Koch explained.
“You might also notice a jump if the previous owners of the property or your neighbours have had to make claims in recent years,” he said.
“Everything from the material used to build your home, to its position on the street and proximity to amenities like train stations can impact your premiums.”
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Insurers measured the cost of rebuilding homes differently, resulting in varying premiums for the same houses.
Home insurance premiums in Sydney and Brisbane were the most expensive in the country for varying reasons, Mr Koch explained.
“Simply put – more people, more problems,” he said. “Big cities with large populations inevitably generate more claims for things like theft.
“Insurers look at historical data. If people in Sydney have lodged more claims on average than those in Adelaide, that gets factored into pricing. More valuable homes and cars, as well as higher repair costs, also drive up average payouts when a claim is made.
“Meanwhile, Brisbane has historically been more susceptible to wild weather, cyclones, floods and hail, compared to Adelaide which accounts for price disparities.”
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