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Expect flexible, usage-based insurance in 2021: EY

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Australian insurers are likely to introduce more flexible insurance offerings in the new year, including usage-based cover, as a focus on serving the demands of existing customers turns to luring new business.

That’s the view of consultants EY, which says insurers were particularly occupied with meeting their existing customers’ needs as they battled pandemic and bushfire claims in 2020.

EY Oceania Insurance Leader Grant Peters says this focus will continue into the new year, but he also expects to see insurers “bring new value propositions to market to help attract new customers”.

He also predicts motor claims may rise to previous levels towards the end of 2021 after a reduction in 2020, while some pressure on income protection claims and some forms of commercial insurance claims may emerge due to the tougher economic outlook.

Insurers will also continue to remain focused on balance sheet and capital management in 2021 as a low interest rate environment and challenging economic conditions put pressure on investment returns, premium volumes and liability valuations.

“We saw several insurers raise capital on equity markets in 2020 and we may see further M&A activity in the sector during 2021,” Mr Peters said.

He says insurers will also need to manage regulatory changes, including a new IFRS17 global accounting standard, new design and distribution obligations and income protection product reforms being driven by regulators.