The general insurance industry faced a “difficult 2021” and mitigation measures will be essential to keep insurance accessible and affordable for all, says the Australian Prudential Regulation Authority (APRA) annual review.

Released today, the document contains a section on general insurance, and puts the industry’s “large fall” in profits down to “higher claims costs from weather events coupled with lower investment income”.

APRA says industry profits remained suppressed for a second successive year, with a 3.2% return on net assets tracking “significantly below” the 10-year average.

It also notes that insurers continued to grapple with COVID business interruption (BI) claims.

“Many insurers found themselves exposed through policy wordings that had not kept up with changing legislation. This created considerable uncertainty, which needed to be resolved through a series of test cases in the courts.

“The financial and reputational impact on the general insurance industry and the uncertainty created over pandemic coverage under BI policies has been significant.”

APRA says climate change will lead to increased frequency and intensity of natural disasters and this will “continue to add increasing challenges of accessibility and affordability of insurance for parts of the Australian community”.

“It will require greater attention to mitigation and disaster preparedness to ensure that general insurance remains accessible and affordable to all Australians,” the review says.

Click here to read the full report.