The latest
KPMG General Insurance Industry Review has revealed that the industry’s profits rose by 25% to $48 billion in 2017 as the hardening market continues its rise.
The annual report found that premiums have risen, with GWP up 5%, as claims costs and operating expenses have fallen, with investment income the only negative for the industry. GWP rose past $42 billion and was largely driven by increasing rates.
Scott Guse, KPMG partner and ASPAC head of IFRS Insurance, told Insurance Business that the upswing is set to continue.
“I think the biggest takeaway is we have been waiting for quite some time for the market to commence its upswing and these results certainly signify that on a number of levels,” Guse said. “That momentum is continuing and I think there is positive sentiment in the market to continue this trend.”
However, the report does note that insurers need to “maintain their pricing discipline” to ensure that growth is “not eroded through short term market-share competitive forces.” Guse said that the latest
APRA quarterly statistics found rate increases in all classes of business except CTP which is being impacted by regulatory moves.
While there is good news for the industry, the KPMG report also found that the underlying insurance margin, which measures overall insurance profitability, stands at 16%, which is still below where the industry stood from 2012 to 2014.
Loss ratio improved over the year, however, to 63.5%, down 2.5%, as larger natural disasters saw their impacts muted by reinsurance coverage. Guse noted that the industry benefited from a lower number of smaller weather events which fall outside of reinsurance coverage, helping to reduce claims costs.
Technology has also helped to reduce claims costs and Guse noted that more efficiency in the claims space is beginning to bear fruit.
“Those sorts of initiatives are all pretty much well ingrained now and they are reaping the awards of those cost efficiencies in the claims cost line,” Guse concluded.
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