As cost of living pressures bite, Aussies prioritise car insurance over health cover

Insurance is all about managing risk and hedging your bets against possible big expenses, and new figures have given a snapshot of Aussies’ priorities when it comes to the things we choose to cover. A recent survey carried out by the Council of Australian Life Insurers (CALI) shows that, as a nation, we prefer insuring our cars to insuring our health.

Conducted on a group of 5,000 employed Australians, the survey found that on average, nearly 80% of people have some form of motor vehicle insurance. That compares to just 66% who have some form of health insurance, and 62% who have either home or contents insurance. They also found that just 34% of Australians overall have life insurance.

There are various common-sense reasons why this might be the case. Australia has a robust public health system, which many may well choose to rely on in lieu of private health insurance. Conversely, liability for damaging someone else’s vehicle in a car accident can be significant, as can the cost of replacing your own, and both these factors could well explain why greater numbers of Aussies opt for car insurance.

The breakdown of the data, however, does reveal a few trends around the different levels of health insurance in Australia. Interestingly, those in the 18-34 age group are the ones most likely to have health insurance, with 68% of people in this group saying they have some form of it, relative to 66% of 35-54 year olds and 60% of 55-64 year olds.

Why are 18-24s more likely to prioritise their health than older Aussies? Dr Rachel David of Private Healthcare Australia said that the trend of young people flocking to private health insurance could be down to the fact that it meets their particular needs.

“Our data shows young people get a lot of value out of having health insurance, particularly for mental health treatment,” she said. “We’ve seen a dramatic increase in the number of young people accessing mental health treatment since the pandemic began.”

Nonetheless, the cost of insurance appears to be a concern for many older Aussies.

Is the cost of living crisis causing Aussies to cut back on health insurance?

Recent figures show that, while the number of Aussies with private health insurance continues to grow, many who currently have cover are opting to cut back. According to the Australian Government, around 400,000 people downgraded their private health insurance coverage between December 2020 and 2023, switching from comprehensive “gold” tier policies to cheaper “silver” and “bronze” cover.

While Aussies have been switching to lower levels of health insurance cover, the figures also show a concurrent rise in claims for elective surgeries. Earlier this year, departing NIB chief Mark Fitzgibbon warned that increasing numbers of claims could lead to substantial price hikes when the next round of health insurance premiums kicks in.

Health insurance providers typically announce their premium increases in early April. This year saw an average premium increase of 3.03%, but Fitztibbon warned that in 2025, prices might rise by as much as 6% in some cases, as health insurance companies look to cover costs in the current environment.

Dr David of Private Healthcare Australia said that cost of living pressures are a clear source of concern for Aussies who want to hold on to their private health insurance.

“People are still relying heavily on the private system because of the huge public hospital waiting lists, but they are struggling with the cost of premiums,” she told ABC News. “So we need to do everything within our power to keep premiums down to give people with private health insurance some kind of cost-of-living relief.”

How can you save on health insurance?

There are many reasons to hang on to private health insurance — you can avoid the Medicare Levy Surcharge and also skip the long wait times for elective surgeries in the public system. If you’re noticing that your budget is stretched, or if you find you are simply not getting value for money from your current policy, there are ways to save on premiums.

Cutting your extras cover and keeping hospital cover only can be one way to save, especially if you do not often claim for extras. If you’re considering switching, you can compare cheaper private health insurance options with Canstar to find a policy that might still suit your needs, while offering premiums less expensive than you’re currently paying.

It’s important to bear in mind, though, that cutting back to a lower level of hospital cover will reduce the things you’re covered for; some basic levels of hospital cover may only cover you for treatment for accidents, excluding a wide range of treatments, and may only pay limited benefits towards a stay in a private hospital.

If you’re considering switching to a cheaper tier of health insurance, it still pays to compare policies carefully to make sure you’ll be covered for all your needs, and will avoid paying the Medicare Levy Surcharge, if this is a priority.

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