Australia’s insurers are as financially strong as they have ever been but competitive pressures are pushing some to be more selective with risk, amid the growing strength of challenger brands.
KPMG’s latest General Insurance Industry Review found that overall the insurance industry is more profitable than at any point since the Global Financial Crisis, posting profits of almost $4.6 billion.
That is a year-on-year increase of 8.3%, driven mainly by premium growth, although this is slowing.
While the report finds many insurers have been using the benign claims environment to work on internal cost-savings, several have also announced greater underwriting discipline, focusing on business with higher margins and lower claims frequencies.
“Willingness to sacrifice premium revenue growth for a higher quality portfolio appears to be in response to the increasing price competition from challenger brands and products,” KPMG reports.
“The Australian insurance industry has evolved in recent years through the emergence of low-cost online insurers, the introduction of aggregators, product white-labelling, and more recently through the introduction of non-traditional market participants such as supermarkets.”
The report shows that while the industry as a whole recorded gross written premium growth of less than 5% last year, the challenger brands grew by almost 25%.
Scott Guse, Asia Pacific Head of Insurance Accounting for KPMG, says a big question for the industry is where the next competitive challenge will come from, with many surmising that companies such as Google, Amazon and Facebook have the potential to upend the sector.
“If the major technology companies flex their corporate muscles in the insurance sector in a manner similar to their entrance in other industries, it could very well change the playing field for all involved,” he says.
Guse says cyber cover offers the biggest opportunity for growth as a product class.
“More customers [are] starting to pay attention to this aspect of their business and gain clarity on what they want to achieve from such a policy,” he says.
“On the customer experience front, insurers are really only beginning to look at how they can better use their customer data to provide better service and drive efficiencies.”
To download the full report, click here.