How insurance premiums are set in Australia

People often talk about insurance "rates", but what you actually pay is a premium: a price worked out for your policy from the risk being insured, the cover you choose, and taxes and levies. This page explains in general terms how premiums are put together, why renewal prices change, what documents to read, and where to go if something goes wrong. It does not compare, rate or recommend any insurer or policy.

This is general information only, not financial product advice. It does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for your circumstances, and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for any policy before you buy or renew. For personal advice, see a licensed adviser: ASIC's Moneysmart explains how to choose a financial adviser (moneysmart.gov.au/financial-advice/choosing-a-financial-adviser) and how to check the Financial Advisers Register (moneysmart.gov.au/financial-advice/financial-advisers-register). This is a free, non-commercial reference page. It sells nothing, gives no quotes, collects no details and is not affiliated with any insurer, broker or government body.

The guide

How a premium is built up, the choices that change it, why it moves at renewal, the documents to read, and how complaints work.

Premium, not "rate"

The premium is the total amount you pay for a policy for its period of cover, usually a year. Insurers do not publish a single "rate" that applies to everyone: each premium is priced for the particular car, home or contents being insured, the person or people insured, the cover chosen, and the taxes and levies that apply. Two people with similar cars or homes can be quoted quite different premiums by the same insurer, so a figure quoted for someone else tells you little about your own.

Risk factors

Insurers set premiums from their assessment of how likely a claim is and how much it might cost. For car insurance, ASIC's Moneysmart lists the type and value of the car, who drives it, how much it is driven, where you live and where it is kept, and the type of cover and excess you choose. For home insurance, Moneysmart notes that changes such as landscaping, renovations or a new pool can raise the cost of rebuilding and so the premium. Where a property is exposed to natural hazards such as storms, floods or cyclones also matters; the ACCC's Northern Australia Insurance Inquiry found that people in northern Australia were paying substantially more on average for home, contents and strata cover.

Excess

The excess is the amount you pay towards a claim. Moneysmart explains that a higher excess generally means a lower premium, but you pay more when you claim. Check whether an excess applies even when an accident is not your fault, and whether different excesses apply to different events or drivers. The PDS sets out each excess.

Sum insured, total replacement, agreed value and market value

Home and contents policies may cover you up to a sum insured (a set amount you choose) or on a total replacement basis; check which one your policy uses. Moneysmart warns that the sum insured should reflect the real cost to rebuild and replace, not market value (which includes land), and should allow for demolition, site clean-up, council fees and temporary accommodation. Many policies have an averaging (coinsurance) clause that can reduce every claim, not only a total loss, if you are underinsured. For comprehensive car cover, agreed value is a fixed amount set by you and the insurer, while market value is what the car would have sold for at the time of the loss, worked out by the insurer at claim time. Moneysmart notes that agreed value usually costs more, and that insurers may reduce the agreed value each year as the car ages.

No claim bonuses, discounts and loadings

A no claim bonus is a discount, usually on comprehensive car insurance, that grows for each year without a claim up to a maximum. Moneysmart notes that an ASIC review found most policyholders were already on the highest rating, that premiums can still rise after a claim, and that paying extra to protect a rating can cost more than the discount it protects. Insurers can also add loadings, for example for younger or less experienced drivers, a claims history or a higher-risk property, and may apply minimum premiums. Moneysmart's advice is not to stay with an insurer only because of a no claim bonus or rating.

Taxes and levies

The amount you pay usually includes GST and state or territory stamp duty on insurance, and in some places an emergency services levy. In New South Wales, Revenue NSW says insurance duty is calculated on the premium, which may include the emergency services levy and GST, and that the emergency services levy is collected by insurers as part of property insurance premiums. Other states fund emergency services differently: in Victoria, for example, the State Revenue Office collects the Emergency Services and Volunteers Fund from property owners rather than through insurance. Duty rates and levies are set by each state and territory and change over time, so this page does not state them; your policy schedule or renewal notice should show the taxes and charges included.

Why renewal prices change

A renewal premium is a new price, not last year's price carried forward. It can change because the insurer's assessment of risk has changed (for example more frequent or costly natural disasters, or higher repair and building costs), because your details have changed, because your car's agreed value or your home's sum insured has been adjusted, because taxes or levies have changed, or because a discount has ended. Moneysmart's advice is to check your renewal notice carefully, check your level of cover and the agreed value or sum insured, ask questions, get other quotes, and consider paying annually if you can, as paying by instalments can cost more.

The PDS, Key Facts Sheet and TMD

The Product Disclosure Statement (PDS) is the document that sets out what a policy covers and what it excludes, the excesses, and how to claim and complain. For home building and contents cover, insurers must also provide a Key Facts Sheet in a government-prescribed format so policies can be compared like for like. Under the design and distribution obligations in the Corporations Act, insurers must also publish a Target Market Determination (TMD) for their products, describing the kind of customer the product is designed for. A TMD helps you see whether a product was designed for someone in your situation, but it is not a substitute for reading the PDS and does not tell you whether a product is right for you.

The General Insurance Code of Practice

The General Insurance Code of Practice is owned and published by the Insurance Council of Australia and sets out standards that insurers who subscribe to it must meet when dealing with customers, including on claims, complaints and customers experiencing vulnerability. The current Code took effect on 1 July 2021 and has since been updated. Compliance is monitored independently by the General Insurance Code Governance Committee, supported by AFCA's code team; the Committee does not award compensation. The Insurance Council says it submitted a strengthened, redrafted Code to ASIC in October 2026. Check the PDS to see whether your insurer subscribes to the Code.

Cooling-off periods

Most general insurance policies sold to consumers have a cooling-off period under the Corporations Act, during which you can cancel and receive a refund. The length and conditions, including what happens if you make a claim during that period, are set out in the PDS. Outside the cooling-off period you can usually still cancel, but the insurer may keep part of the premium or charge a fee as set out in the PDS.

How to complain

Start with the insurer's internal dispute resolution process: contact the insurer, explain the problem and say what you want done. Insurers generally have 30 days to respond to a complaint. If you are not happy with the response, or you do not hear back in time, you can complain to the Australian Financial Complaints Authority (AFCA), which is free for consumers and independent of insurers. Time limits apply to lodging a complaint with AFCA, so do not delay. Financial counselling services and community legal centres can also help.

Directory

Official and independent resources only: government regulators, the external complaints scheme, the Code's monitoring body, and state revenue offices. No insurers, brokers or comparison services are listed.

What is listed. Only government bodies, the external dispute resolution scheme and the Code's owner and monitoring body are included, and each link was checked against the organisation's own website where it could be fetched. The list is not complete and is in no particular order.

Not an endorsement. Links are provided for information only and are not endorsements. This page does not list, rate or recommend any insurer, broker, adviser or comparison website, and it is not affiliated with any organisation below.

Inclusion in this directory is not an endorsement. Links are to official websites as published at the time of checking.

Questions to ask before buying or renewing

Plain questions worth asking an insurer, and yourself, before you buy a policy or accept a renewal. They are prompts to help you read the documents, not advice about any product.

Have I read the PDS, and the Key Facts Sheet or TMD?

The PDS sets out what is covered and excluded. The TMD describes who the product was designed for; check whether that sounds like you.

Is my sum insured or agreed value still right?

Rebuild and replacement costs change, and agreed values can be reduced each year. Check the figure on every renewal, especially after renovations or major purchases.

What excess applies, and when?

Ask whether there are different excesses for different events or drivers, and whether an excess applies when the incident is not your fault.

Why has my renewal premium changed?

Compare it with last year's premium and ask the insurer to explain any change, including changes to taxes, levies, discounts or your details.

Is the price for paying annually or by instalments?

Paying monthly can cost more over a year than paying once. Ask what the total is for each option.

What are the cooling-off and cancellation terms?

Check how long the cooling-off period is, what happens if you claim during it, and what fees apply if you cancel later.

How do I complain if something goes wrong?

Check the insurer's complaints process in the PDS, whether it subscribes to the General Insurance Code of Practice, and remember AFCA is free if the complaint is not resolved.

About this page

insurancerates.com.au is a free, non-commercial reference page published by Radiant Life Distributors Pty Ltd, Adelaide. It provides general information only and is not financial product advice; it does not compare, rate, quote or recommend any insurance product, insurer or adviser, and it collects no personal details. It is not affiliated with, or endorsed by, any organisation listed, and links are not endorsements. Information was checked against official websites in October 2026; laws, levies and codes change, so confirm current details with the organisations linked above and read the PDS and TMD for any policy.