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Competition Intensifies In Australian General Insurance Market
As competition intensifies in the $24 billion general insurance market, Australia’s largest general insurers may have to find other ways beyond increasing premiums to combat rising claims resulting from natural disasters.
A survey by professional services firm KPMG of the market for general insurance found that the entrance and emergence of new players such as Coles, Virgin Money and Australia Post may have placed pressure on larger rivals to maintain premiums or risk losing their market share.
Brian Greig, head of KPMG’s insurance practice, said new entrants had focused on price in order to build market share, providing robust competition to incumbents in the general insurance market, currently dominated by Allianz, Insurance Australia Group, Suncorp and QBE.
Mr. Greig said that Australian customers still have some degree of brand loyalty, unlike customers in the British car insurance market, who are heavily influenced by price.
“Any competition in the market is always going to have some pressure on the ability to increase rates, but I think the larger players would be thinking these are small players at this stage,” Mr. Greig said.
Over the last half decade or so, premiums have been steadily climbing as insures seek to contain the impact of rising claims and more recently offset investment returns that have declined in recent years.
According to the KPMG survey, gross written premiums have risen by 4.3 per cent in the last financial year and stand at $35.2 billion, largely driven by increases in premium rates, as insurers seek to focus on pricing for risk as opposed to volume.
The study pointed out that extreme weather events were now part of the norm, reflecting a new business environment for Australian general insurers.
The Victorian bushfires in February cost the insurance industry $1.12 billion, making it the third-largest weather event by cost in the past 15 years.
KPMG noted that changing weather conditions has means that the threat of bush fires has now increased.
The study suggested that if indeed insurers faced pressure to maintain premiums, then they would need to find other ways of making sure adequate capital existed to be able to pay claims for those sorts of events.
Options available included reinsurance which placed the bulk of the increased claim risk with reinsurers. By doing this, they could achieve a decent return from their investments through good funds management, and improve their claims processes so that only valid claims were paid.
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One Response to “Competition Intensifies In Australian General Insurance Market”
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Competition in the market has to be a good thing.
With a brand like Virgin or Australia Post you can really get some traction