‘We've seen significant inflation on everything’: What this means for your insurance bill
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Rising costs are a concern for many Australians, and one particular expense has been putting increasing pressure on households.
While there are signs of relief on the horizon, the road ahead remains uncertain.
Recent developments in the industry have sparked discussions about affordability, corporate decisions, and the broader economic impact.
Australians already struggling with rising insurance costs faced more increases ahead, though at a slower pace, according to Insurance Australia Group (IAG) chief executive Nick Hawkins.
IAG reported a 91 per cent increase in net profit for the first half of the financial year, reaching $778 million by 31 December 2024, largely due to milder weather conditions.
Mr Hawkins acknowledged that inflation had taken a toll on both insurers and customers, pushing costs higher across Australia and New Zealand.
‘We've seen significant inflation on everything,’ he said.
‘That's really had a big impact on us and our customers for the last couple of years.’
Despite the challenges, he suggested the outlook for consumers was improving.
‘I would expect the next six to 12 months to see the inflationary impact of insurance reduce,’ he said.
‘We're really seeing inflationary pressures come down. The cost of reinsurance is sort of neutralising, and that's going to be reflected in pricing going forward.’
Premiums were expected to rise more in line with inflation rather than at the rapid rate seen in previous years.
‘Not just for IAG, by the way. That would be a view on the market generally,’ Mr Hawkins added.
According to the Bureau of Statistics, insurance prices had risen 11 per cent in the year to December, easing from a peak of 16.4 per cent annual inflation in March 2023.
IAG, like many businesses, had struggled with surging costs in building materials and reinsurance, which were ultimately passed on to policyholders.
‘We had the same challenges as other businesses and communities in Australia and New Zealand.
‘Anything we needed repaired, building industry, building supplies—everything went up, plus reinsurance.’
Reinsurance, which allows insurers to share risk globally, has seen substantial cost increases in recent years.
While IAG's premiums rose 6 per cent in the last half-year, this was a slowdown from the 12.5 per cent increase in the previous period.
Although Mr Hawkins expected pricing to stabilise, he warned that reinsurance costs had ‘dramatically changed’ and would continue to influence premiums, though not as sharply as before.
Despite IAG's strong profit growth, its share price fell 12.6 per cent, closing at $7.80 on 1 February 2025.
Mr Hawkins refused to comment on his 78 per cent pay rise in the last financial year, which saw his salary reach $5 million while Australians continued to face rising insurance costs.
Instead, he highlighted IAG’s role in the broader economy.
‘There's an appropriate return we need to make because we play an important role as a shock absorber,’ he said.
‘The way we're running IAG, the way we're looking at our costs, the way we're engaging with our supply chain—I do see that inflationary pressure coming down.’
Beyond inflation, climate change poses an ongoing risk for the industry.
‘That is a risk that we are exposed to.
‘We know in Australia and New Zealand, we build communities in places that are exposed to risk.
‘We need to make sure we don't make more of those planning decisions because that risk is not coming down, it's going up.
‘We are acting, but we need to continue to act to strengthen the resilience of our country.’
IAG research following its financial update indicated a rise in consumer concerns after the January wildfires in Los Angeles.
The company noted that nearly 90 per cent of Australians and New Zealanders intended to take ‘proactive steps’ to protect their homes from natural disasters, despite domestic weather conditions being less severe.
Meanwhile, UBS Global Research reported that IAG had stronger profit margins in New Zealand due to lower exposure to compulsory third-party insurance in Australia.
‘This gave it better profit momentum in the first half of 2025,’ the note stated.
However, with minimal growth in home and motor insurance policies in Australia and a slight decline in New Zealand, IAG signalled a slowdown in premium hikes.
UBS analysts predicted that IAG would focus on increasing policy sales, noting that Suncorp had similar ambitions, intensifying competition in the market.
‘Since Suncorp is also looking to grow its customer base, competition in the market is expected to heat up.’
‘This could limit IAG's potential for surprise profit boosts and stock price growth in the near future.’
‘As a result, the company's neutral rating remains unchanged.’
In a previous story, IAG faced a massive class action lawsuit over allegations that its algorithm unfairly increased premiums for certain customers.
The case raised serious concerns about how insurers calculate pricing and whether policyholders were being charged more based on hidden factors.
Read more about the lawsuit and its potential impact here.
Stay ahead of rising costs. Here is more news about inflation.
With insurance costs shifting and competition heating up, do you think premiums will finally stabilise? Is this just a temporary slowdown?
Share your thoughts in the comments.
While there are signs of relief on the horizon, the road ahead remains uncertain.
Recent developments in the industry have sparked discussions about affordability, corporate decisions, and the broader economic impact.
IAG reported a 91 per cent increase in net profit for the first half of the financial year, reaching $778 million by 31 December 2024, largely due to milder weather conditions.
Mr Hawkins acknowledged that inflation had taken a toll on both insurers and customers, pushing costs higher across Australia and New Zealand.
‘We've seen significant inflation on everything,’ he said.
‘That's really had a big impact on us and our customers for the last couple of years.’
Despite the challenges, he suggested the outlook for consumers was improving.
‘I would expect the next six to 12 months to see the inflationary impact of insurance reduce,’ he said.
‘We're really seeing inflationary pressures come down. The cost of reinsurance is sort of neutralising, and that's going to be reflected in pricing going forward.’
Premiums were expected to rise more in line with inflation rather than at the rapid rate seen in previous years.
‘Not just for IAG, by the way. That would be a view on the market generally,’ Mr Hawkins added.
According to the Bureau of Statistics, insurance prices had risen 11 per cent in the year to December, easing from a peak of 16.4 per cent annual inflation in March 2023.
IAG, like many businesses, had struggled with surging costs in building materials and reinsurance, which were ultimately passed on to policyholders.
‘We had the same challenges as other businesses and communities in Australia and New Zealand.
‘Anything we needed repaired, building industry, building supplies—everything went up, plus reinsurance.’
Reinsurance, which allows insurers to share risk globally, has seen substantial cost increases in recent years.
While IAG's premiums rose 6 per cent in the last half-year, this was a slowdown from the 12.5 per cent increase in the previous period.
Although Mr Hawkins expected pricing to stabilise, he warned that reinsurance costs had ‘dramatically changed’ and would continue to influence premiums, though not as sharply as before.
Despite IAG's strong profit growth, its share price fell 12.6 per cent, closing at $7.80 on 1 February 2025.
Mr Hawkins refused to comment on his 78 per cent pay rise in the last financial year, which saw his salary reach $5 million while Australians continued to face rising insurance costs.
Instead, he highlighted IAG’s role in the broader economy.
‘There's an appropriate return we need to make because we play an important role as a shock absorber,’ he said.
‘The way we're running IAG, the way we're looking at our costs, the way we're engaging with our supply chain—I do see that inflationary pressure coming down.’
Beyond inflation, climate change poses an ongoing risk for the industry.
‘That is a risk that we are exposed to.
‘We know in Australia and New Zealand, we build communities in places that are exposed to risk.
‘We need to make sure we don't make more of those planning decisions because that risk is not coming down, it's going up.
‘We are acting, but we need to continue to act to strengthen the resilience of our country.’
IAG research following its financial update indicated a rise in consumer concerns after the January wildfires in Los Angeles.
The company noted that nearly 90 per cent of Australians and New Zealanders intended to take ‘proactive steps’ to protect their homes from natural disasters, despite domestic weather conditions being less severe.
Meanwhile, UBS Global Research reported that IAG had stronger profit margins in New Zealand due to lower exposure to compulsory third-party insurance in Australia.
‘This gave it better profit momentum in the first half of 2025,’ the note stated.
However, with minimal growth in home and motor insurance policies in Australia and a slight decline in New Zealand, IAG signalled a slowdown in premium hikes.
UBS analysts predicted that IAG would focus on increasing policy sales, noting that Suncorp had similar ambitions, intensifying competition in the market.
‘Since Suncorp is also looking to grow its customer base, competition in the market is expected to heat up.’
‘This could limit IAG's potential for surprise profit boosts and stock price growth in the near future.’
‘As a result, the company's neutral rating remains unchanged.’
In a previous story, IAG faced a massive class action lawsuit over allegations that its algorithm unfairly increased premiums for certain customers.
The case raised serious concerns about how insurers calculate pricing and whether policyholders were being charged more based on hidden factors.
Read more about the lawsuit and its potential impact here.
Stay ahead of rising costs. Here is more news about inflation.
- Brace yourself for the biggest health insurance premium hike in years
- How much have you been paying for groceries lately? See how this receipt exposes a staggering price surge
- New power bill credits to roll out as government tackles rising living costs
With insurance costs shifting and competition heating up, do you think premiums will finally stabilise? Is this just a temporary slowdown?
Share your thoughts in the comments.
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