Ever wondered how many kilometres the average driver in Australia travels in a given year? It’s an important question to consider, because most car insurance cover is based on average kilometres driven. Thus, those who don’t use their cars very often may be surprised to find that they are effectively subsidizing the rates distance commuters, long-haulers and habitual road trippers.
So how often do you have to drive to hit the average? The exact numbers are disputed, but various environmental groups peg the average kilometres driven per year per Australian at between 20,000 – 24,000 km. If you drive less than these averages, it is likely that you are paying more than is necessary.
You are not alone. Recent studies by the Australian Bureau of Statistics show that an ever-increasing number of the working age population is working from home all, or part of the week. The number of individuals using public transport is also on the rise. Add retirees, housewives, cyclists, walkers and those who just live close to everything into the mix and it seems that rampant overpricing is underway. How did this happen?
Blame is allocated on both sides here. Consumers wanted instant internet quotes and Australian car insurance companies were willing to give it to them. Of course, as the old adage goes, “if it’s good and it’s fast . . . it’s not cheap”. Perhaps it didn’t seem expensive before, but with the economy tightening up and everyone looking at their budgets, questions are arising about how car insurance cover can consistently be so expensive.
The added expense comes from the way that blanket coverage quotes were calculated— using “average drivers”. Yet most Australians aren’t average and they don’t deserve to get one-size-fits all policies. The technology exists to offer more personalized and tailored approaches.
The key here is asking questions. Those who drive fewer kilometres during the week than the “average driver” fall into a different risk bracket because they are not on the road as often. However, most insurance companies don’t bother to ask about where they drive their car, so they are not aware that their clients are being charged for cover that doesn’t appropriately match their risk level.
Fortunately, there are a few unique car insurance companies who do take the time to differentiate. They ask questions such as where you drive during the week for work, whether your car is used for commuting purposes, and whether your car is parked securely or not. While it is a few more questions than consumers may be used to seeing, these insurers can then offer discounted rates based on real risk levels. For just a few extra moments at the beginning of the quote process, you could be walking away with substantial premium differences.
If you are working from home, rely primarily on public transport or just drive a few kilometres a week, it’s really not sensible to overpay for your insurance cover. Why pay more when you could be paying less?
Therefore, the next time you see a car insurance coverage questionnaire, look at what they are asking you. Do you see questions that make an effort to get to know you and price your risk level appropriately? Or does it seem like your budget is about to get smothered by an “average driver” blanket coverage policy once again? Be prepared with additional details about your habits and you could also be preparing for additional dollars in your budget.