A new report has found that insurers are pushing up prices on intermediated business pack products with the trend expected to continue.
The 2017 Optima report, released by actuarial firm Finity, has revealed that the business pack market saw premium increases over FY17 as insurers look to improve profitability.
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“We expect profitability to improve over the coming years as insurers continue to push through rate increases, particularly in the intermediated segment,” the report states. “The soft market environment appears to be turning, so we expect to see premium rates continue to increase, but only by a small percentage each year.”
Finity said that an increasingly granular and sophisticated pricing methodology will benefit insurers that have better analytic capacity as larger firms can leverage their personal lines capabilities in the key commercial segment.
Meanwhile, though much has been made of the disintermediation of the SME market, the Finity report notes that while direct growth will continue, brokers will remain relevant.
“The direct online distribution channel should continue to grow, although we believe this will be a gradual transition rather than a sudden shift. This is because the complexity of business insurance will mean that brokers will remain relevant for the non-micro SME businesses,” the report continues.
The report states that, overall, it was “a reasonably good year for the industry” as insurance margin stood at 14%.
Looking forward to 2018, Finity noted that margins should continue to expand on the back of further hardening throughout the commercial market. However, the CTP market is the “clear fly in the ointment” as premium volumes and underlying current year profitability is set to “decrease significantly.”
“The future premium pool will shrink over 10% following changes to the NSW CTP scheme under the MAIA (Motor Accident Insurance Act),” the report continues. “We are expecting regulatory pressure to continue to subdue rate increases in Queensland. Rates in SA will increase by CPI.”
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