Product distribution remains a “thorn in the side” for many parts of the insurance sector, says JLT Australia in an industry review.

It says brokers and insurers are tempted to improve margins by streamlining product distribution, but this is difficult in insurance, where products differ and deficiencies are only discovered when things go wrong.

The report says corporate businesses with any level of complexity find it difficult to create distribution, online or otherwise, where all aspects of a risk can be independently considered, assessed and priced.

“Price comparisons are meaningless unless other coverage parameters, such as retention levels, limits, coverage scope and the like are wholly consistent and the entire market has been engaged,” JLT says in its Inform report.

For this reason comparison sites and aggregator platforms for insurance have struggled for credibility, as they may not include key participants or recognise subtle but important differences in insurers’ offerings.

It says insurers will continue to look for retail partnerships to sell their products, but “this channel really only suits more simplified products where advice is either minimal or non-existent”.

The broker says insurance faces a challenging year following last year’s falls in profits, higher reinsurance costs and weak investment returns.

JLT Re estimates that reinsurance costs for large domestic carriers have increased at least 75% since January 1.

It warns that further stress on results could be caused by another year of poor underwriting results, driven by natural catastrophes, weak investment returns and higher costs.

“Ultimately the pain will find its way to policyholders as revenue growth is sought or coverage restricted/withheld,” it says.

Apart from natural catastrophes, JLT says major losses in the industrial, marine and legal areas have also been experienced.

The loss of the liner Costa Concordia on the Italian coast in January is expected to cost insurers more than $US500 million ($481 million), while the ongoing class action in Australia on bank fees takes in 12 banks with 150,000 customers and claims of $200 million.