Australia insurers sustain profits on higher premiums, stable claims

Health insurers are likely to see moderate profitability.

Australia’s insurance sector is expected to maintain steady profitability in 2026, supported by higher premiums and stable claims, according to a report by S&P Global Ratings. 

Whilst growth is projected to slow, solid capital buffers and cost controls are likely to sustain earnings across property, life, health, and mortgage segments.

For property and casualty insurers, profitability is expected to remain sound as easing claims inflation and recent rate hikes continue to offset expenses. 

Home insurance, in particular, has benefited from higher premiums and relatively calm weather conditions. 

Comprehensive reinsurance programs and the government’s Cyclone Reinsurance Pool are expected to help mitigate large loss events.

In life insurance, earnings are seen stabilising as investment returns offset underwriting pressures. 

However, rising mental health-related claims continue to weigh on income protection and disability products, with nearly half of total life insurance payouts in 2024 linked to mental health cases. Distribution is improving as financial advisers and digital channels regain momentum.

Health insurers are likely to see moderate profitability, with medical cost inflation outpacing government-approved premium increases. 

Participation in private health cover remains strong due to continued immigration and demand for faster healthcare access, though rate approvals remain a key regulatory hurdle.

Mortgage insurers are projected to post steady profits as lower interest rates revive housing activity. 

Whilst the government’s Home Guarantee Scheme has reduced demand for lenders mortgage insurance, low default levels, strong house prices, and solid underwriting standards are supporting the sector’s financial strength.

Overall, S&P said the credit strength of Australian insurers remains stable, underpinned by strong capital adequacy and disciplined risk management, despite rising costs and global economic uncertainty.