The general insurance industry is battling its most challenging circumstances in 20 years, a Parliamentary hearing was told today.

Insurance Council of Australia (ICA) CEO Andrew Hall told the House of Representatives Standing Committee on Economics that the country’s economic recovery following COVID-19 is “the envy of the world”, but that not all sectors are thriving.

“Lower unemployment and record levels of investment are all positive indicators of the performance of the Australian economy,” he said.

“Unfortunately, not all sectors of the economy are performing as strongly, and the general insurance sector is enduring its most challenging circumstances for two decades.

“Insurer profitability over the 24 months ending March 2021 was down 64% on the preceding two years, and according to APRA the entire general insurance sector only made a profit of $19 million in the most recent March quarter, largely because of the impact of recent natural disasters.”

Mr Hall says over the past three years insurers have paid out more than $7.4 billion in natural disaster claims, with more than $5.4 billion paid out since the 2019 bushfires.

Increasing global reinsurance costs are also contributing to rising premiums locally, Mr Hall says.

“We are aware that the availability and affordability of some commercial lines of insurance for small and medium sized businesses has become challenging.

“In many of these categories insurers themselves are under pressure to provide a profitable product, with gross loss ratios running at near 100%, so solutions are often difficult to determine.

“There is no single silver bullet for resolving these issues, but we are serious about grappling with these issues for the benefit of small businesses and the broader economy.”

The committee is keeping a watch on how financial services companies are responding to Hayne royal commission reforms.

ICA and major insurers including Suncorp, IAG, Allianz and QBE were quizzed today on a number of issues such as climate change, business interruption cover during the pandemic, loyalty taxes and the mouse plague.

Our main Monday bulletin will include a detailed report of today’s hearing.