Comparing last year's insurance premium to this year's

A recent article by Nicole Pedersen-McKinnon suggests a very simple way to motivate you to compare your house and car insurance. Nicole is a commentator and educator who delivers Smart Money Start, fun financial literacy, in high schools around Australia. themoneymentorway.com

She writes…

It's stunningly simple yet breathtakingly effective – and our government needs to bring it to Australia. Insurers in Britain could shortly be forced to put last year's premium on this year's renewal notice. So customers will instantly see the previously secret 10, 20 or even 30 per cent annual price hike.

In almost every facet of your finances, providers rely on the apathy of existing customers to fund tremendous discounts to entice new ones. 

This is bad enough when your expense stays static but insurers, in particular, slug you more each renewal. They justify it on the basis of increased claims, higher medical costs, more bad weather events and so on  – but get switching and you can usually access far cheaper premiums.

A year-on-year comparison should give us the kick up the pants to do it, suggests an extensive trial by  Britain's Financial Conduct Authority (one will  start in Australia soon, led by the Insurance Council of Australia).

The FCA tested whether seeing premiums side by side spurred consumers to shop around at renewal time. The results were startling. In the trial of 300,000 consumers, between 11 per cent and 18 per cent more switched or negotiated a discount when they were shown how much their premium had increased.

In case you haven't crunched these numbers – or have no clue where your previous renewal notices are – I've trawled through mine for a real-life example of the take over time.  (Note that armed with a quote from a new-breed online insurer, I always negotiate these down – and so should you.)

You'll have winced along with every other Australian at your recent home and contents renewals… they hit me with a 4 per cent increase. (Be aware there's a lot of wriggle room here; I negotiated them down 11 per cent, far cheaper than the previous year!)

For car insurance, my insurer tried to charge me 8 per cent extra last year. (My savings tip? There are so many inexpensive alternatives for vehicle insurance.)

The annual April increase in health insurance is published and rightly attracts plenty of indignation. It was 5.6 per cent this year, to total 47.5 per cent since 2010; yours will vary around this industry-average figure. (Be sure to turn off obstetrics if you no longer need it to slash your premium by an average $500 a year.)

Life insurance is one of the most economical – and vital – insurances going. But they attempted to increase mine by 9 per cent last year and 10 per cent the one before that. (Try snaring a multi-policy discount here by switching all life policies to a life specialist.)

And I was infuriated when I was told recently that a 15 per cent per cent jump in my income protection insurance was due to "industry-wide repricing". I pay level premiums – which are more costly initially but become comparatively cheaper over time – to avoid just this. (More usual are "stepped" premiums, which start more cheaply and rise as you age.)

Australian research by the Consumer Action Law Centre says 86 per cent of us would welcome the change.  

Once a year you should review your financial providers and a manual renewal letter/email is a great trigger to interrogate the insurers. 

Come on Malcolm/Bill/TBA, force insurers to print last year's magic number next to this year's massive one, and help us help ourselves.