Understanding Your Car Insurance Premium

Your car insurance premium is likely to change each year and you may wonder why. As a trusted insurer, we want to help you understand your premium. This guide gives you the facts: how your premium works, how we calculate it, and why it can change.

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How your premium works

The money you pay us to insure your vehicle is called a premium. By paying your premium, you’re contributing towards a shared pool of funds that helps to pay claims. It’s also used for expenses - such as staff, office space and running our website - that keep our business going.

We consider each policyholder’s circumstances to determine their likelihood of making a claim. That’s how we make sure each policyholder’s premium makes a fair contribution to the shared pool of funds.

Calculating your Car Insurance premium

We’ll base your premium on your circumstances, the cover you’ve chosen, your likelihood of making a claim, and the potential cost of the claim. That’s why each person’s car insurance policy is different, and no two premiums are alike. To work out how much it will cost to provide insurance for your vehicle, we use various data sources. We’ll also ask you specific questions. Your answers are important, and all customers have a duty to not make a misrepresentation.

To calculate your premium, we use a number of risk factors. Some of the key risk factors to determine your likelihood of making a claim include:

Use of the vehicle

Whether a vehicle is used for personal or commercial purposes helps us figure out the level of risk involved with it. We consider the frequency and distance of travel, as well as the purpose of the vehicle.

The factors in this list are specific to personal-use vehicles. See the Commercial motor section for factors relevant to commercial-use vehicles.

Amount and type of cover needed

The cover amount means the level of cover provided by the insurance policy. CTP insurance is a mandatory policy that forms part of your registration and generally covers anyone who drives your vehicle, including yourself, for injuries caused to others in an at-fault motor accident. Third-party insurance only covers damage you cause to other people’s car or property. Comprehensive insurance covers both damage to other people’s cars and property, as well as damage to your own car. The more comprehensive the cover is, the higher the premium will be.

Excess

Excess refers to the amount of money you agree to pay out of your own pocket towards any claims before your insurance kicks in. For comprehensive cover, if you choose a higher excess, your premium will typically be lower because you’re taking on more of the risk. If you choose a lower excess, your premium will be higher because we would be taking on that risk.

Age of the drivers or how many years they’ve held a licence

Our claims experience shows that inexperienced drivers are more likely to have a claim. This could be from overconfidence, a lack of skills or awareness, or distracted driving.

Claims history of all drivers

Past driving behaviour tends to predict future driving patterns. Our claims experience shows that drivers who have had an at fault claim are more likely to have another claim at some stage.

Make and model

For comprehensive cover, the availability of parts and cost of repairs differs between makes and models. Other factors such as the cost of the car, safety features, performance, theft rate, and crash test ratings all play a role in determining the premium. For information specific to electric vehicles, visit the Allianz EV Hub.

Value of the car

For comprehensive cover, we look at the potential costs of insuring cars when deciding on the premium, making sure we can cover the costs if a claim is made. The agreed value, or amount a vehicle is insured for, is an important factor. Generally, the lower the sum insured, the lower the premium will be. However, other factors like claims cost can also impact the premium.

Financing

Allianz internal data suggests that customers who finance are more likely to have claims. This affects the premium for comprehensive cover.

Usual overnight parking location

This refers to where your car is usually kept and if it’s in a higher or lower risk area for accidental loss or damage to the vehicle. This includes areas prone to collisions, theft or vandalism.

Compulsory government charges

Compulsory charges imposed by the Australian government, such as Stamp Duty and GST. These vary from state to state and can affect the cost of your car insurance. These are added on top of the base premium and are often influenced by how much the vehicle is insured for as well as the premium.

Calculating your Commercial Motor premium

The factors that affect the premium of vehicles used for business purposes are slightly different to those that apply to personal-use vehicles.

This table shows how the considerations differ:

	Comprehensive personal Car Insurance	Commercial Motor Insurance

Use of the vehicle (private or business)		Business use only

Amount and type of cover needed

Excess

Age (of yourself and other drivers)		If the youngest driver is under 25, we’ll ask their D.O.B

Gender (of yourself and other drivers)

Claims history of all drivers		Impacts whether we accept to insure a vehicle but not price

Make and model (including any modifications)

Value of the car (including any modifications)

Financing

Overnight parking location

Compulsory government charges (such as stamp duty and GST)

In addition to these factors, your commercial motor insurance premium will also be influenced by:

Age of the vehicle

In some cases, older cars can have lower insurance costs because they have a lower value and are cheaper to fix if there's an accident. However, if they aren’t well-maintained or are more likely to break down, insurance premiums may go up.

Optional endorsements

Optional endorsements can affect your commercial motor insurance premium. These endorsements give you extra cover options that go beyond the basic policy. They're made to fit your specific needs and potential risks. Each optional endorsement comes with a cost, which is reflected in the premium you pay.

Hire car optional benefit inclusion

Including this benefit in your policy gives you the convenience of a replacement vehicle while your own vehicle is being repaired or serviced. This option will increase your premium because of the additional cost. This is only available for vehicles up to two tonnes.

How claims affect your premium

Did you know that a significant portion of your overall premium goes towards paying claims? If the overall cost and number of claims paid increases, this can force premiums higher.

Here are some of the key factors that can influence claims costs:

New vehicle technology

New safety features in cars, such as crash sensors and advanced braking systems, help prevent accidents or make them less severe. This means fewer claims are made, and we don’t have to pay out as much money. This can lower premiums and keep people safer.

Number of vehicles on the road

The more cars there are on the road, the higher the chances of accidents and collisions are. This increases the number of claims we get and the amount of money we have to pay out, which affects the overall cost of premiums.

Average value of cars

Higher average car values tend to result in higher claim amounts, as the cost of repairing or replacing a more expensive vehicle is usually greater. This can lead to increased premiums to account for the increased risk and potential claim amounts.

Claims inflation

This refers to the increase in the cost of claims over time. This can happen when vehicle repair costs increase due to more advanced technology, expensive materials, or disruptions in supply chains. It can also be influenced by factors such as changes in laws and regulations.

Labour shortages

A lack of skilled labour, such as mechanics and repair technicians, can lead to longer waiting times for processing and repairing vehicles. This can cause frustration and dissatisfaction for policyholders. The need for additional resources to handle these issues can lead to higher premium prices to cover the increased costs.

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Disclaimer

This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 ("Allianz"). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.

Any opinions expressed constitute our views as of February 2024 and are subject to change. Neither Allianz, nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article.

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Allianz acknowledges Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of the lands on which we live and work across Australia. We pay our respect to First Nations Elders past and present.

Any advice here does not take into account your individual objectives, financial situation or needs. Terms, conditions, limits, and exclusions apply. Before making a decision about this insurance, consider the relevant Product Disclosure Statement (PDS)/Policy Wording and Supplementary PDS (if applicable). Where applicable, the PDS/Policy Wording, Supplementary PDS and Target Market Determination (TMD) for this insurance are available on this website. We do not provide any form of advice if you call us to enquire about or purchase a product.

Allianz Australia Insurance Limited ABN 15 000 122 850 AFS Licence No. 234708 is the insurer of any general insurance products offered, and Allianz Australia Life Insurance Limited ABN 27 076 033 782 AFS Licence No. 296559 is the insurer of any life insurance products offered. Each entity is responsible for any statements and representations made about its products, on this website.

Understanding your Allianz Car Insurance premium