Aldi’s shock move to save Aussies on $331 ‘tax’

Aldi-lujah! There could not be a better time for Aldi to launch car and home insurance in Australia and here’s why.

Insurance premiums are rising at the fastest rate in 23 years, with an average 16 per cent annual premium increase, according to the Australian Bureau of Statistics. The last time they were going up this fast, Aldi was launching its first store here.

I’ve been tracking the cost of living and how people feel about it for half that time and I’ve never seen Australians so angry about the cost of home and car insurance.

So even though Roy Morgan data suggests that 2 in 3 of us just renew our insurance without comparing, I suspect there are more Aussies prepared to shop around and switch than ever before.

That makes the timing ideal for both consumers and for Aldi as a business.

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The time is ripe for a new challenger brand with a track record of taking on big duopolies and triopolies in groceries and mobile plans, saving Australians money.

Will it be the cheapest insurance for everyone? No. The reality of insurance pricing is that what’s good value for your address might not be good for mine. So get a quote and see for yourself.

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But the cheapest of the cheap is not always ideal when it comes to insurance. You’re looking for that sweet spot where the price is low and the cover is high.

Aldi savings could be ‘substantial’ as ‘loyalty tax’ cut

Another reality of insurance pricing is that if you haven’t switched from a big brand in years, you could be paying hundreds of dollars in “loyalty tax” – that’s the extra amount they tack onto loyal customers’ premiums every year.

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The “loyalty tax” was estimated to cost Australians a collective $4.5 billion last year. That’s a staggering $331 per person.

On top of that, one of the biggest insurance companies in Australia is now facing a price-gouging class action claiming they used artificial intelligence to identify their most loyal customers and charge them extra.

That company is called IAG, which you’ve probably never heard of. But you’d know their big brands such as RACV, SGIO, SGIC, NRMA and CGU. IAG denies it but they’ve also paid the corporate regulator a $40 million fine for similar practices last year and they’re defending a federal court action along similar lines.

So if Aldi can entice some of those loyal customers to be disloyal, the savings could be substantial.

As far as I’m aware, Aldi Insurance is the first in Australia to say they won’t charge a loyalty tax – new customers will pay the same as old customers.

This might mean their first-year pricing isn’t as low as brands that give you a big year-one discount, but on the flip side, you won’t have to worry about bill shock in year two when that first-year discount expires.

3 simple things you need to reduce cost of insurance

All in all, more competition can only be good for insurance customers. Now what we need is more transparency over insurance pricing too – which only governments can give us.

I can put my details into a single comparison website and see all the publicly available plans for energy, telco products and banking products – but not for insurance.

That’s why I launched a petition to “Stop Home and Car Insurance companies from over-charging Australians”, saying Australian governments need to do make three things happen:

1. Comprehensive comparison websites so we can easily compare prices: Many big insurers refuse to cooperate with these websites at present, unlike other industries such as energy, telco and banking.

2. Ban ‘price walking’: This is the practice of charging older, loyal customers more each year despite no major change in their cover, which results in them paying more than new customers. The UK banned this in 2022.

3. Extend the Consumer Data Right to home and car insurance by January 2025: This is a technical solution that will make switching easier for insurance customers.

So I’ll be getting a quote from Aldi and if their insurance is anything like their groceries and mobile plans, they’ll probably get some of my insurance budget. Bring it on.