NSW floods, car insurance, risky loans: This week’s best banking news

• Insurance Council activates hotline as it declares NSW in an insurance catastrophe 
• Why are car insurance premiums on the rise? 
• APRA bats away concerns for growing number of risky loans 
• Electric vehicle tax for drivers to be imposed by the Victorian government 
• Debt consolidation: why it might be a smart move right now 
  

All in this week’s best banking news: editor’s pick. 

NSW in an insurance catastrophe, says the Insurance Council of Australia 

This week, the Insurance Council of Australia (ICA) declared an insurance catastrophe in flood affected areas of New South Wales.

Over the weekend the Warragamba Dam in Sydney spilled over for the first time since 2016. Plus, in other areas of the state the flood caused major damage to homes and property. 

It is for this reason that the ICA declared an ‘insurance catastrophe.’ The Council’s main aim is to prioritise and bring forward any insurance claims affected by the wild weather. 

A disaster hotline has also been set up. So if you need to contact the ICA with a general inquiry on how to claim, call 1800 734 621. 

Similarly, here’s a rundown on if you need to make a car insurance claim due to floods. 

Read full article: Insurance Council declares catastrophe in NSW, activates hotline for a rundown of what you need to do to return to your property. 

Car insurance claims are becoming more costly, despite fewer claims from customers 

As a result of the COVID-19 pandemic, last year less people were on the roads - meaning there was less opportunity for car accidents and in turn car insurance claims. 

In fact, the amount of insurance claims made in 2020 dropped by 16.4%, according to the Insurance Council of Australia. Not only that, the average number of people making a claim on their policy dropped by more than 10%. 

However, Mozo’s 2020 car insurance report found that insurance premiums have actually risen by 2%. 

Mozo’s Finance Expert, Peter Marshall explains that there is a reason for this. Not only did a whole bunch of insurance companies have to pay out policyholders as a result of the bushfire crisis, business insurance claims also rose due to the effects of COVID-19 and lockdown. 

And according to the Australian Prudential Regulation Authority (APRA), the net profit of the insurance industry last year compared to 2019, was $35 million to $3.1 billion respectively. 

Read full article: Car insurance premiums rise, despite less claims in 2020: What is the bigger picture? for ways to reduce your car insurance premium. 

More Aussies taking out home loans could mean higher risk of defaults

Fresh numbers from APRA have revealed that the share of new home loan borrowers with a debt-to-income ratio of six or higher rose by 17.2% over the December 2020 quarter. 

In addition, the number of high LVR mortgages jumped up to 42% (up from 39.9% in the previous quarter). 

However, APRA hasn’t shown intentions of intervening, indicating that lending processes have not started to deteriorate. 

“Despite the increase in new higher LVR lending in the December 2020 quarter, the majority of outstanding residential mortgage loans remain well covered by collateral,” APRA said.

“The share of high DTI lending in the December 2020 quarter is within its historical average, and does not indicate a significant change in lending conditions.”

Read full article: Risky loans on the rise, but APRA bats away concerns for a deeper breakdown of the current home loan environment. 

Victorian drivers to face electric vehicle tax 

As a result of new legislation that was passed last week, the Victorian government is the first to impose a tax on electric vehicles (EV) and zero-emission vehicles. 

To be effect July 1, the tax will cost EV owners 2.5 cents per kilometre driven (two cents for hybrid vehicles). This is estimated to come to a total of $300 per year for EVs. 

The introduction of the tax is set to ensure that Victorian drivers are treated equally while also creating a sustainable road network, says Victorian Treasurer Tim Pallas. 

"We are providing confidence to new electric vehicle owners with a massive boost to our charging network, funded by the distance-based charge, which will reduce range anxiety as a key barrier to take-up," he said.

However, not everyone is on board with the new initiative, Greens MP, Sam Hibbins said the argument for the EV tax was not justifiable and was nothing more than a “tax grab by the government.”

Read full article: Victorian government to impose an electric vehicle tax for drivers for a look into if Aussies are adopting EVs. 

Why a debt consolidation loan might help your finances right now

Personal debt is a reality for many Australians, according to RBA stats. 

The numbers showed that as of June last year 20% of households have credit card debt and 33% have other personal debt. 

And in some cases, debt carries across multiple financial products. However, considering where personal loan rates sit at the moment, keepy debts separate may not be the smartest way to go. That’s where a debt consolidation loan is useful. 

In fact, between July 2019 and January 2021 personal loan rates dropped as shown in a recent report from APRA and RBA. On the other hand, credit card rates increased over the same time period. 

Here’s a rundown: 

Read full article: Why a debt consolidation loan could be a smart move right now to see how a consolidation loan might affect your credit rating. 

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