Understanding insurance premiums

Your premium is the amount you pay for your Allianz Insurance policy. It’s paid into a shared pool of funds that’s used to pay claims and expenses to run our business. To determine a premium, we consider certain factors relating to each policy holders' circumstances and their likelihood of making a claim.

All insurers have a base premium. It’s the starting point that helps us determine the cost of insurance coverage for our policyholders.

The law requires us to include these charges to fund various government initiatives. We forward these costs to the necessary government organizations. Here are some examples:

• In NSW, the emergency services levy (ESL) or fire services levy (FSL) supports the essential work of the emergency services.
• Goods and services tax (GST), a federal tax that’s applied to most goods and services including insurance.
• Stamp duty, also known as transfer duty, is charged on certain transactions, like buying a car or a house, or on insurance.

Reinsurance is specialist insurance for insurers to help cover the cost of claims for major disasters like bushfires or floods.

By transferring a portion of our risk to a reinsurer, we can manage risk more effectively. It means we can offer more comprehensive coverage knowing we have their financial backing. In fact, insurance regulators require us to maintain a certain level of reinsurance cover.

Reinsurance works in the same way as your car or home insurance. The number of claims paid by the reinsurer impacts the premium we pay for our policy.

Unfortunately, Australia has experienced a number of natural disasters over the past few years. This has caused reinsurance costs to go up.

There are a number of risk factors that influence your premium. If we believe your risk of making a claim is high, your premium is likely to be higher than someone with less risk. As everyone's level of risk is different, each insurance premium can be different. As an insurer, we need to balance the risk involved in providing cover for each policy holder or situation.