General insurance enjoying economic boom

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30 July 2012

The general insurance sector is continuing to grow, although affordability in some areas remains a problem, Deloitte Access Economics General Insurance Partner Rick Shaw says.

“Commercial lines are growing with increases in property premiums flowing through to most households,” he told insuranceNEWS.com.au.

“The two-speed economy effect is being seen as rates of underinsurance and non-insurance increase at lower socio-economic levels.

“More sophisticated rating by insurers in response to recent disasters is effectively making insurance unaffordable in some regions.”

The June quarter business outlook from Deloitte Access Economics says general insurance is part of a booming financial services sector, which is holding up better than expected.

Mr Shaw says while the general insurance industry is both healthy and competitive, there are potential problems looming.

“The resources industry is becoming more sophisticated about risk management and the insurance industry needs to respond to meet market needs,” he said.

“But if there is a slowdown in Queensland and WA’s resource industries, this will flow through to the insurance market.”

Mr Shaw says domestic insurance also faces the risk of a slowdown in the economy.

“Domestic insurance would be impacted by a slowing economy, especially outside the larger urban areas,” he said. “Sydney and Melbourne would be expected to be more resilient.”

Mr Shaw says reinsurance costs have now been passed onto consumers, but the industry still faces threats from regulatory requirements.

“Insurers can expect increases in regulatory capital requirements, particularly from the 2014 introduction of the horizontal reinsurance requirement, and this may impact profit levels,” he said.