Australians who locked in cheaper insurance premiums could be in for a shock when their new customer discounts expire, according to new analysis from Compare the Market.

Many insurers offer an initial discount – often as much as 15% off or a flat rate of $20, $50 or $75 off – to entice new customers when insurance policies are purchased online.

However, in most cases these discounts only apply to the first year of the policy, meaning customers may notice a sharp increase in their premium the following year.

Compare the Market’s economic director, David Koch, has warned Australians to not be complacent when it comes to renewal time.

“Insurers use discounts on new policies to attract new customers. If you’re savvy, you can take advantage of this by comparing and switching, to benefit from a new discount each year,” Mr Koch said.

“But if you wrongly assume that the discounts are perpetual, and you let the policy roll over, you could end up missing out on potential savings.

“For example, a customer might find that their insurer has applied a 5% premium increase generally to their policy. This increase, coupled with the removal of the 15% discount the customer received on their first year premium for being a new customer, could mean an overall increase of over 23% on the customer’s renewal notice from last year’s premium.

“Whether it’s car or home and contents insurance, never automatically renew any policy. It pays to compare to see if you can find a better deal and switch.”

According to the car insurance comparison experts, a hypothetical 2024 Ford Ranger Wildtrak owner in Brisbane* could see their comprehensive car insurance quote rise by at least $268 if they were to obtain a quote with the same insurer for the same policy without the 15% new customer discount, before accounting for any premium increases that might otherwise be applied in the future.

Meanwhile, a hypothetical 2024 Toyota RAV4 GX Hybrid 2WD owner in Brisbane* could expect their comprehensive car insurance premium quote for the same policy to increase by at least $221 if they were to obtain a quote with the same insurer without a first-year 15% discount applied.

Mr Koch encouraged Australians to always challenge their premium renewal price before making a payment.

“An insurer offering a new customer discount may still end up being more expensive than another insurer that simply provides a more competitive premium, so don’t assume you’re getting a good deal without exploring other options,” Mr Koch said.

“Just like your grocery shop, it may be worth giving a lesser-known insurance brand a try. There are challenger insurers out there that may offer a similar level of cover at a cheaper price. In some cases, you’re essentially paying more for marketing and a popular name as many smaller brands share underwriters with the big insurers.”

Insurance continues to be a key driver of inflation, in addition to construction costs and rental increases. The latest Australian Bureau of Statistics figures from September shows a 14% rise in insurances year-on-year.

Mr Koch urged Aussies to keep shopping around to avoid being stung.

*Disclaimers

The cheapest insurer with a new customer discount using Compare the Market’s car insurance comparison tool was selected for an example driver and vehicle profile. We then used the quoted annual premium to calculate an assumed 15% ‘increase’ figure, excluding the potential rise in premium costs.

Comprehensive car insurance costs were quoted on 26 November 2024 for a 34-year-old male driving living in Brisbane (4051), who drives 15,000km per year (for private use or commuting to work only) with a clean driving history, rents a home with a garage, does not own another vehicle, and is employed full-time.

The policy was based on a $900 excess with no optional extras, no driver age restriction, and policy commencing on 20 December 2024.

The vehicles selected were the 2024 Ford Ranger Wildtrak ute with the standard 2.0-litre turbo-diesel engine and 2024 Toyota RAV4 GX Hybrid 2WD. Both vehicles were white in colour, had no options or modifications, no finance, and no pre-existing damage.

These quote figures do not represent all vehicle owners and is subject to change.