Insurers to be hit by weather and weaker economy
Severe weather events are no longer unusual and insurers’ pricing models must reflect this, according to KPMG.
The consultant’s latest survey of the local insurance industry says a downturn in investment markets, continued rate pressure and an increase in weather-related claims have impacted insurers’ profitability and pricing strategies.
KPMG Insurance Group Head Brian Greig told insuranceNEWS.com.au while insurers won’t want to lose market share, the greater frequency and severity of weather events will see personal lines rates increase over the next year – especially in storm-sensitive areas.
“The regions where rates are likely to increase are where there have been big storm events and people have had their houses significantly repaired,” he said. “I would imagine they would be happy to pay increased premiums to have their houses insured.”
Insurers reported an overall profit after tax of $3.2 billion, 20% less than the previous financial year. Weather events cost them more than $1.15 billion, part of which was borne by reinsurers.
Mr Greig says Australian insurers across the board will be tightly managing their businesses after increases not only in their loss ratios but also in their expense ratios.
“From what we have seen over the past year, major insurers have been buying more reinsurance coverage,” he said. “They have also been very focused on their own systems and processes and trying to reduce costs.”
He says it will be interesting to see how external economic factors affect insurers over the next year – whether homeowners stung by higher interest rates will contemplate not insuring or underinsuring.
“When we do end up in an economic downturn, insurance may become a discretionary spend,” he said.
State governments should look at reducing state taxes, Mr Greig says. “They are only adding to the problem of underinsurance.”
The consultant’s latest survey of the local insurance industry says a downturn in investment markets, continued rate pressure and an increase in weather-related claims have impacted insurers’ profitability and pricing strategies.
KPMG Insurance Group Head Brian Greig told insuranceNEWS.com.au while insurers won’t want to lose market share, the greater frequency and severity of weather events will see personal lines rates increase over the next year – especially in storm-sensitive areas.
“The regions where rates are likely to increase are where there have been big storm events and people have had their houses significantly repaired,” he said. “I would imagine they would be happy to pay increased premiums to have their houses insured.”
Insurers reported an overall profit after tax of $3.2 billion, 20% less than the previous financial year. Weather events cost them more than $1.15 billion, part of which was borne by reinsurers.
Mr Greig says Australian insurers across the board will be tightly managing their businesses after increases not only in their loss ratios but also in their expense ratios.
“From what we have seen over the past year, major insurers have been buying more reinsurance coverage,” he said. “They have also been very focused on their own systems and processes and trying to reduce costs.”
He says it will be interesting to see how external economic factors affect insurers over the next year – whether homeowners stung by higher interest rates will contemplate not insuring or underinsuring.
“When we do end up in an economic downturn, insurance may become a discretionary spend,” he said.
State governments should look at reducing state taxes, Mr Greig says. “They are only adding to the problem of underinsurance.”