2025 Guide: Understanding and Reducing Your Insurance Premium in Australia

Australians are feeling the squeeze as insurance premiums climb to new highs in 2025. From home and car insurance to health and life cover, the price of peace of mind isn’t what it used to be. But what’s really driving these premium hikes, and can you do anything to keep your policy affordable?

What Is an Insurance Premium?

An insurance premium is the amount you pay (monthly, quarterly, or annually) to maintain your coverage. Whether it’s for your car, home, health, or life insurance, this payment keeps your policy active—making sure you’re protected when the unexpected hits. In 2025, premiums are top-of-mind for many households as cost-of-living pressures and inflation bite.

Why Are Premiums Rising in 2025?

Several factors are pushing insurance costs higher across Australia this year:

• Extreme Weather Events: Following a string of severe storms, floods, and bushfires, insurers have faced a surge in claims. The Insurance Council of Australia reported over $4.5 billion in disaster-related claims in 2024 alone, and these costs are being passed on to policyholders in 2025.

• Inflation and Supply Chain Issues: Rising repair costs for homes and vehicles, plus shortages of materials, have made claims more expensive to settle. This directly impacts the premiums you pay.

• Regulatory Changes: The 2025 reforms to the General Insurance Code of Practice have improved customer protections but increased compliance costs for insurers. These are factored into pricing models.

• Reinsurance Costs: As global reinsurance becomes pricier due to climate risks, Australian insurers are adjusting premiums to protect their bottom line.

According to the Australian Competition and Consumer Commission (ACCC), average home insurance premiums rose 12% nationally between 2024 and 2025, with flood-prone regions seeing spikes above 25%.

How Are Insurance Premiums Calculated?

Each insurer uses a mix of data to set your premium. The key factors include:

• Risk Profile: Where you live, your claims history, the value and type of asset being insured, and your chosen level of cover.

• Policy Features: Extras like accidental damage, choice of repairer, or added benefits can increase your premium.

• Excess Amount: A higher excess (what you pay if you claim) usually means a lower premium, and vice versa.

• Discounts: Multi-policy, no-claim bonuses, and loyalty discounts can shave dollars off your premium—though many insurers have tightened these offers in 2025.

For example, a Brisbane homeowner in a flood-prone area may face a premium of $3,600 per year in 2025, up from $2,800 in 2024, while a low-risk property in inner Melbourne might only see a modest increase.

Smart Ways to Save on Your Premium

With premiums climbing, here are practical strategies to help keep your insurance bill manageable:

• Shop Around: Don’t auto-renew without checking competitor quotes. Insurers often reserve their best deals for new customers.

• Increase Your Excess: If you can afford a higher out-of-pocket cost in the event of a claim, raising your excess can lower your annual premium.

• Bundle Policies: Combining home, contents, and car insurance with the same provider can unlock multi-policy discounts.

• Review Your Cover: Make sure you’re not over-insured for items you no longer own or don’t need covered. Tailor your policy to fit your actual needs.

• Maintain a Good Claims Record: Some insurers offer no-claim discounts that reward claim-free years.

Keep an eye out for new digital insurers entering the Australian market in 2025, as they may offer more competitive pricing and flexible cover options—especially if you’re comfortable managing your policy online.

What’s Ahead for Australian Insurance?

Premium increases are likely to persist while climate events, inflation, and regulatory costs remain high. However, government discussions around reinsurance pools for high-risk regions and the push for more transparent pricing could reshape the market in the next few years. Staying informed, regularly reviewing your cover, and leveraging available discounts will help you stay ahead of the curve—and keep your insurance affordable in 2025 and beyond.